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March 18, 2011

Goldman Sachs Searches the Dark for Canadian Liquidity

By John D'Antona Jr.

Goldman Sachs Electronic Trading has built algorithms that seek out hidden liquidity in Canadian securities.

The three algorithms--branded Sonar, Sonar Dark and Stealth--search dark pools and non-displayed orders on public markets in Canada and the U.S. for liquidity in Canadian stocks.

The algos will access Canadian markets when the security is only tradable in Canada, and both Canadian and U.S. markets when the security is dually listed, said Darren Sumarah, vice president at GSET in Toronto.

Sonar aggregates liquidity across multiple public and dark venues. Sonar Dark seeks liquidity at dark and gray venues--non-displayed liquidity. Stealth is designed to capture liquidity at all displayed and dark pools up to the order's limit price. Traditionally, Stealth has been used to rest orders on non-displayed marketplaces, allowing the trader to hide the order's footprint in the marketplace.

"Now the trader can seamlessly access best prices across these two markets," Sumarah said. "Traders can post and rest orders intelligently, based on where the security typically executes, either in the U.S. or Canada."

Trading in Canadian dark pools represents just 2 percent of total volume, he said.

Of around 4,000 securities listed with Canada's TMX Group, a little more than 180 are dually listed. The algos also include real-time foreign exchange features, such as taking Canadian dollar denominated securities and converting their prices into U.S. dollars and convert the prices of U.S. securities into Canadian dollars.

 

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