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Spoofing, Surveillance and Supervision

Jay Biondo, Product Manager - Surveillance at Trading Technologies, co-authored an article along with James Lundy and Nicholas Wendland, both of Drinker Biddle & Reath LLP, reviewing the CFTC's regulations and expanding efforts, 21st century surveillance and supervision, as well as strategic recommendations.

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March 1, 2014

Fast Forward

By John D'Antona Jr.

Also in this article

  • Fast Forward
  • JPMorgan's Troise and Ciment Discuss Business After Rebuilding Its Electronic Trading Desk
  • Page 3

Daniel Ciment: The logic we have built is based on years of experience in the industry from my team. We rebuilt our algo and routing platforms from the bottom up, using the best-in-class technology. We also have built highly sophisticated models to drive the order placement process.

 

Traders: Are you transparent with the buyside about your order-routing logic and methodology?

Ciment: Absolutely. We explain to our clients exactly how our products work, what they do, where they post, where they sweep and where they are getting executed-full transparency.

 

Traders: Recently, it was reported that FINRA will be asking brokers questions about their order-routing logic, how an order gets routed. Are you ready to respond?

Ciment: We offer up this type of analysis to our clients already-whether it is on the very high-level algo performance or it is detailed routing performance, where their orders are getting executed, where they are getting routed or how the performance is at various venues. We offer all of that. Many of our clients want to even dig deeper, which is great, because we have that capability and interest.

 

Traders: During the rebuild, you created a dark pool, JPM-X. How is it performing?

Ciment: It is performing really well. While we don't report volumes publicly, the volume is significant. Moreover, it is high-quality volume. When we look at the quality of the volume in our pool, we do not just look at fill rates and volume. We perform a variety of proprietary analysis to make sure the volume is helping our overall trading performance.

Troise: While we do not report volumes now, we would happily report if there was a consistent and clearly defined standard.

 

Traders: Do you have a way of watching the participants within the pool and for those that are exhibiting adverse behavior?

Ciment: First of all, when we built the product, it was built on the best technology available, including direct data feeds from the exchanges. By using direct feeds, and we think we are somewhat unique in that, it helps our client execution quality within the pool because it is looking at the fastest market data possible using leading technology.

JPM-X is also a price-tier-time priority ATS. These tiers allow our institutional clients to get better executions in JPM-X. So if the price is the same, an institutional client will trade before a principal order or a market maker that might be in the pool. Clients can also choose to not trade against certain types of flow in our book.

 

Traders: So, what is next for the desk? Are there any specific targets or goals you want to achieve?

Troise: We have a lot of targets that we use to measure the business. For example: execution performance, client usage, volume traded, market share, revenues. We are very focused on delivering our products to clients and tuning performance to achieve best execution for their order flow characteristics.

 

Traders: Is there a sector of the market you are looking to tap that might be underserved?

Troise: We are focused on delivering electronic execution products to several client segments: institutions, hedge funds and third-party broker-dealers.

 

Traders: Has JPMorgan's electronic trading group increased, decreased or remained static since the build-out?