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December 13, 2007

Algos Access the Dark

By Nina Mehta

Buyside demand for algorithms that seek out liquidity in so-called "dark pool" electronic crossing systems is up. That has prompted three major firms to come up with solutions. Morgan Stanley is giving its customers an algorithm called Night Vision, designed for direct market access orders. The algo will seek executions within the inside market, according to Bill Neuberger, Morgan Stanley's head of product development for electronic trading.

Night Vision could also potentially be used to provide connectivity between MS Pool, Morgan Stanley's new alternative trading system for single-stock orders, and other third-party dark pools, according to Neuberger.

At the same time, two other heavy-hitters, Instinet and Credit Suisse, are partnering to offer their respective clients access via algorithms to one another's dark pools. Credit Suisse operates a blind crossing system called CrossFinder. Instinet runs CBX for buyside firms. Both firms expect the arrangement to increase fill rates.

The algorithms of each firm will also be available on one another's trading platforms. Credit Suisse's algos will be available on Instinet Trading Portal and Newport. Instinet's algos can be accessed through the 40 third-party trading systems that carry Credit Suisse's suite of algos.