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July 1, 2008

SIG's New Pool Connects Brass Users

By Nina Mehta

Susquehanna Investment Group's RiverCross ATS, which launched in mid-May, is initially targeting the sellside through a relationship with SunGard's Brass order management system.

"This is a strategic way of accessing a broad customer base right out of the box," said Paul Onderdonk, an executive at RiverCross.

Brokers using Brass can send orders directly into RiverCross. Sellside firms can also connect to the dark pool through a FIX connection. RiverCross, an agency-only dark pool designed for block and non-block flow, intends to add broker-sponsored buyside clients directly to the system in the coming months.

The dark pool is owned and run by SIG but operates independently through a separate broker-dealer called RiverCross Securities. Financial-services company SunGard hosts the RiverCross technology.

Ralston Roberts, senior vice president at Brass, points out that one of the benefits of RiverCross for brokers is low latency. "Having the RiverCross infrastructure co-located with Brass trading decreases the latency," he said. More than 130 broker-dealers use the Brass OMS. The Brass Liquidity Services unit has modified the routing strategies it offers clients to include access to RiverCross.

"Some dark pools aren't as accessible as others," observed Larry Tabb, founder and CEO of research firm TABB Group. "RiverCross aims to be an open platform, and the Brass connectivity provides them with access to a very significant pool of liquidity."

SIG is now counting on its trading reputation to grow RiverCross. "Market participants value SIG's experience, trading acumen and technology," Onderdonk said. "They know we're going to add value." He declined to say how many firms are connected to the pool or what the ATS's average daily volume is, although he said the pool's "progress has exceeded our expectations at this point."

One way RiverCross expects to differentiate itself from its competitors is through its pricing. The pool, which is still in a trial period, is considering a maker-taker fee schedule, in which liquidity providers and liquidity takers have different pricing. Liquidity takers, for example, could pay a per-share fee for executions, while liquidity providers either pay a smaller fee for executions or nothing. Onderdonk said RiverCross "is in the process of finalizing its fee structure," but declined to elaborate.

The only other dark pool that has announced maker-taker pricing, which is popular in the exchange and ECN landscape, is Aqua, a joint venture owned by eSpeed and Cantor Fitzgerald that's designed for big blocks. Aqua, which is waiting for more buyside OMSs to connect to the system before it tries to build volume, gives a rebate to liquidity providers and charges takers.

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