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January 31, 2008

Leading While Dancing in the Dark

By James Ramage

Light or dark, it's still all about control. And agency broker BNY ConvergEx says it's now possible for buyside traders to maintain control of an order sent simultaneously to dark pools and the displayed markets.

BNY ConvergEx developed TactEx to be what it calls an advanced direct-market-access product: a suite of order types that functions like an algorithm but doesn't rely on historic data beyond the last execution to determine where orders are sent in the dark. It also lets users cancel or adjust those dark orders, said Craig Viani, a managing director of product management in electronic sales at BNY ConvergEx.

"The tools today actually force you to bifurcate your order and route one part of it to dark pools, dark algos, dark aggregators, and another part to the light market," Viani said. "What we're doing here is simplifying that process and giving you one tool to do both."

TactEx also employs a function called "dynamic rebalancing" to maximize traders' exposure to as many dark pools as possible, he added. Users choose what percentage of their order should be exposed to dark pools. Then that portion of the order is exposed to BNY ConvergEx's internal pool, VortEx, as well as external ones. As orders get executed, TactEx rebalances them to ensure that the user is represented across as many dark pools as possible, Viani said.

"Algos are either set-and-forget or set-and-leave-in-for-quite-a-bit-of-time, go-in-and-change," Viani said. "But they don't have that in-and-out functionality-again, the lack of control. So, we're giving that control back to the traders."

TactEx is available this month, Viani said, and hooks up with all of the major order and execution management systems.

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