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Foreign Exchange Infrastructure: Yesterday, Today and Tomorrow

In this exclusive to Traders Magazine, John Turney, Global Head of Outsourced FX at Northern Trust, discusses the evolution of the fx infrastructure and what is to come.

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July 16, 2010

Pipeline Scans for Blocks

By James Ramage

Pipeline Trading Systems is scouring the cash equities markets, both displayed and dark, as well as the options markets, in an attempt to assemble blocks for its buyside clients. It does this through its new service, Liquidity Builder.

The service works from the premise that there is predictability in the order flow in dark pools, displayed bids and offers and in electronically executable options markets, said Fred Federspiel, Pipeline's chief executive. Liquidity Builder passively monitors the flows in each to identify available liquidity.

"As we study the characteristics of order flow, we've seen significant predictability in performance of various algo techniques, and predictability in order flow," Federspiel said. "And we have found it's critical to deploy these signals into the trading tools that we offer back to the institutional traders."

When it detects the presence of significant liquidity in, say, a name that is typically illiquid, it sends out an alert to all institutional customers who've expressed an interest in the stock and have signed up for the service. The institution is free then to place an order with Pipeline to trade at the spread if the alert fit its strategy.

"That alert is a signal to our institutional customers that a large, Pipeline-size block of the underlying equity is effectively available at the NBBO," Federspiel said.

 

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