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December 11, 2009

Quod Offers 'Adaptive Cross'

By Peter Chapman

Proposed changes to rules governing dark pools could give a boost to technology supplied by smart-order-routing vendor Quod Financial. That's according to Dhiren Rawal, Quod's managing director in charge of U.S. operations.

The Securities and Exchange Commission has proposed three rules that, if approved, could curb usage of dark pools. That could lead to more internalization of order flow by brokers, Rawal said. "If you know that dark pools must start becoming more transparent, you are more likely to keep your liquidity latent in your own world," the exec explained. "The more liquidity you keep latent, the greater the opportunity you have to cross."

To deal with any surge in internalization, Quod recently began offering what it calls an "adaptive cross" that enables users to concurrently tap into both external and internal liquidity. The setup has three parts: a matching engine, a smart order router and a newly built "quoting engine." The quoting engine transmits house positions or customer orders into the matching engine. The smart order router, armed with the knowledge of a new order, will check both the external markets as well as the matching engine for liquidity.

 

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