Jared Dillian
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Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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January 1, 2007

Darkness Visible (Systems and Utilities)

By Nina Mehta

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  • Darkness Visible (Systems and Utilities)


BNY ConvergEx Group

>ConvergEx Cross

BNY ConvergEx Group, the third-largest agency brokerage after Instinet and ITG, was formed last year by the merger of BNY Securities Group and Eze Castle Software. The crossing platform, which will execute orders at the NBBO midpoint, will launch in February for ConvergEx customers. In the second quarter, the platform will provide other dark pools and broker algorithms with access to its liquidity. Large customers can also auto-cross the first 10,000 shares at the midpoint and negotiate for larger size within the NBBO. Customers can opt out of executing against any type of flow they define. The firm plans to roll out special-purpose crosses such as volume weighted average price, closing price and portfolio crosses once ConvergEx Cross is fully launched. ConvergEx expects to have about 500,000 shares passing through the system every day.



The agency broker, now part of Nomura Securities, Japan's largest brokerage, runs a number of crossing systems. Instinet's most recent, rolled out in 2003, is Continuous Block Crossing. CBX is a buyside-only continuous crossing system for customers with resting and pass-through flow. Half the executions occur at the NBBO midpoint. Unlike in most ATSs, orders submitted to the system can be configured to display whatever-and as much-information about price, side and size that customers want to share with other CBX users. A smart router within CBX lets customers simultaneously seek out naturals in the dark liquidity pool and post orders on exchanges and in ECNs, where they may attract liquidity. There is no set minimum size for orders submitted to CBX. The execution cost varies by customer, but is around 1 cent per share. Customers submitting orders through Instinet front-ends pay a slightly higher rate than those sending flow through FIX connections. Since late last year, Credit Suisse's and JPMorgan's algorithmic customers have been able to match up against CBX flow. Access to posted CBX flow is being negotiated for other brokers' algos. Average execution: 7,200 shares. Average daily volume: 5 to 7 million shares.

>Intraday Cross

Instinet's Intraday Cross, launched in 2004, is a series of scheduled crosses that occur at 9:50 a.m., 11:50 a.m. and 2:50 p.m. every day. The crossing platform is open to buyside firms and brokers, but hasn't attracted enough volume to compete with ITG's POSIT cross. It executes about 1 to 2 million shares per day.

>VWAP Cross

Instinet also offers a VWAP Cross product. The two crosses take place at 8:30 a.m. and 9:15 a.m. for buyside and sellside firms interested in crossing orders at the full-day VWAP price. Instinet runs two sessions because some firms want to lock in the amount crossed early, while others aren't ready to commit to the full-day VWAP until closer to the market's open. The average daily volume executed in these VWAP crosses has more than doubled in the last year and now ranges from 15 million to 20 million shares.

ITG Inc.

>POSIT Match