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May 3, 2010

BIDS Sees Bump in Trading Volume

By John D'Antona Jr.

BIDS Trading's precipitous rise in volume is due to a number of factors and no single initiative, according to the firm. At the end of the first quarter 2010, BIDS's trading volume was up 57 percent over the same period in 2009.

Tim Mahoney

An anonymous crossing network, owned by a consortium of brokerages, BIDS executed 28.7 million shares a day on average--double-counted--for the first quarter, according to the firm.

BIDS has been rolling out a new interface over the last six months that lets the buyside connect directly to the system. Brokers, meanwhile, have begun aggregating the unexecuted portion of algorithmic orders and putting them into BIDS as blocks, making it easier to hit minimum size parameters that the buyside places on counterparties.

Combine those two factors with the buyside's need to pay big brokers for their research, and BIDS chief executive officer Tim Mahoney thinks his firm has the wind at its back.

"What's changed at the margin is, we have this buyside product now that's helped us increase buyside traders' usage," said Mahoney, a 30-year veteran and former buyside trader. "I want to empower the buyside trader--give him the tools he needs."

Despite its growth, BIDS lags longtime block-crossing stalwarts ITG Posit and Liquidnet. Statistics from Rosenblatt Securities for February show BIDS traded an average of 14.6 million shares per day--single-counted. In February, ITG Posit executed 27.9 million shares, Rosenblatt estimates, while Liquidnet traded 24.6 million shares on average for the same period.

Still, BIDS's average daily volume for February represented a 97 percent increase year-over-year, according to Rosenblatt's latest report. BIDS' average trade size was only 386 shares in February. By comparison, Rosenblatt wrote Liquidnet's average trade size was 53,864 shares, Pipeline's 48,565 shares (estimate) and ITG Posit's 6000 shares (estimate).

Most recently, BIDS rolled out its BIDS Trader software, which allows the buyside to connect directly to the crossing network. That has helped pump up volumes, Mahoney said, because buyside orders previously were routed to the ATS via a broker-dealer.

Mahoney's buyside experience has been a major benefit, said Joe Gawronski, president and chief operating officer at Rosenblatt Securities. "He understands the mind-set of the buyside trader, and that is a pretty big differentiator," he said.

Establishing connectivity to the buyside wasn't easy. Buyside traders, said Mahoney, like to have their uncommitted orders sit in their own order management system. The problem was, it had no software system to connect the ATS to the buyside.

That changed after BIDS launched BIDS Trader in August 2009, a Web-based application that currently connects it to 150 buyside users.

While 150 buyside users seem small when compared to some of his competitors like Posit, Liquidnet or Pipeline who have hundreds of clients, Mahoney is optimistic about the future.

"We clearly understand that is a very low number, and for us to be competitive, we have to get numbers like our competitors," Mahoney said.


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