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November 10, 2009

Instinet Offers New Twist for Blocks

By Nina Mehta

In a nod to the pervasive use of algorithms in executing blocks, Instinet has a new dark pool, called BLX, aimed at aggregating orders being worked in algos into larger trades. Although BLX is joining dozens of other dark pools, it has a twist that sets it apart. "It's a combination of continuous and point-in-time crossing in an attempt to bring back blocks," said Jonathan Kellner, president of Instinet North America. "This is multi-party and algo-friendly."

The goal of BLX is to enable blocks to build by aggregating flow, most likely from algos working institutional orders, to match against larger block orders, typically from naturals resting in BLX. The twist is that a second match takes place three seconds after the first, at the same price. The point is to draw flow out of algos by letting firms know a match just occurred in a particular name. After the initial match, the system sends out IOX, or "indication-of-cross," messages to algos and others capable of reading the data. IOX messages include only the name of the stock that matched, with no size information and no indication of which side may have residual shares left over from the first match.

So far, most of BLX's volume is in the first match, but Kellner expects the second match to become "significant" as algos connect. Customers of BlockCross, operated by Pulse Trading, can place orders into BLX from their desktops.

 

 

 

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