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July 10, 2009

Smart Order Routing Adapts

By Peter Chapman

Smart order routing is not smart enough. That's the position of Dhiren Rawal, managing director in charge of U.S. operations at Quod Financial.

Rawal was hired last December to establish a beachhead in the U.S. for the European vendor as part of its effort to market its version of smart order-routing technology to U.S. broker-dealers. Quod cut its teeth in Europe, where Markets in Financial Instruments Directive has fragmented trading, creating a need for technology to tie the markets together.

Rawal is hoping to convince broker-dealers--and later, the buyside--that the run-of-the-mill smart routing technology in use in the U.S. is dated and that Quod's technology results in better trades. "Today's smart order routing has a static feel," Rawal told Traders Magazine. "It's sweep, then rest. Then sweep again."

If, for example, there are four marketplaces, a typical SOR system would sweep all four in succession and then do the same continuously until the order has been filled. By contrast, Quod's technology uses real-time market intelligence to ferret out the liquidity in the appropriate venue rather than wasting time checking all four. Key to this "adaptive" approach, as Quod calls it, is the use of complex event processing technology in the decision-making process.

Quod has 16 customers, mostly in Europe, including Barclays Capital, for its SOR technology. It has landed two prospects in the U.S., Rawal says.

 

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