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June 4, 2007

Liquidnet Mimics Rival with Portfolio Trading

By Nina Mehta

Liquidnet, in a move that brings it up to speed with crosstown rival Investment Technology Group, is adding portfolio trading functionality to its platform.

The operator of the popular crossing network is incorporating technology acquired when it bought Miletus Trading this year to enable customers to trade lists of hundreds of names more efficiently.

The new functionality solves a problem Liquidnet's customers faced. When matches occurred in Liquidnet for names within a portfolio, traders had to negotiate them one by one. "For larger customers, that could be over 100 matches. That's not an efficient way to trade a program," said Alfred Eskandar, chief executive of Miletus Trading and a member of Liquidnet's corporate strategy group. Liquidnet bought Miletus, an algorithmic trading broker and technology firm, in March.

Liquidnet's new capability is similar to what's offered by ITG, which enables customers to integrate access to POSIT, the broker's crossing platform, into their execution of lists. Liquidnet's move signifies an escalation in the ongoing skirmish between the two agency brokers. ITG recently launched Liquidnet-like functionality in a partnership with Merrill Lynch called Block Alert (see Traders Magazine, January 2007).

Liquidnet's program trading functionality makes it possible for portfolio names to interact with the large order flow already in Liquidnet and Liquidnet H2O. According to Eskandar, that previously wasn't always the case because Liquidnet had limited functionality for programs.

Richard Johnson, managing director at Miletus, said the integration "will reduce market-impact costs for customers with portfolios by enabling them to interact with the liquidity we have in our pools." Initial results, he added, have been "encouraging." The rollout began with firms that are existing customers of both Liquidnet and Miletus.