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March 1, 2014

PDQ Opens New Institutional Desk

ATS Says the buyside is less concerned about speed of execution and fraction-of-a-penny savings on a trade and more about trade size and toxicity.

By John D'Antona Jr.

PDQ ATS is looking to get into the institutional trading business and has started an institutional equities group to get the buyside's business and its bigger trades. And it has hired two new ex-exchange pros to help get the new venture going.

PDQ has always been a sellside destination, focusing more on the retail order flow. Now it wants to get the buyside's orders in via the brokers or directly to be part of the firm's call auction model, PDQ chief executive Keith Ross told Traders in an interview. [IMGCAp(1)]

"We want to go directly buyside and allow them to participate in our safe liquidity pool," Ross said. "We can aggregate all types of contra liquidity, HFT and the naturals, and create a market of committed liquidity an order can be traded against."

Keith Ross, PDQ CEO

As Ross and PDQ see it, the buyside is less concerned about speed of execution and fraction-of-a-penny savings on a trade and more about trade size and toxicity, something the venue offers through the aggregation of liquidity.

PDQ ATS is powered by an algorithm hosting facility and response mechanism that is designed to emulate the interaction and dynamism of traditional floor brokers, while retaining the anonymity and confidentiality of a dark pool. It also offers clients an auction model for executions, where orders are held up to 20 milliseconds to create an auction book. Then order responses are prioritized on a price-time basis. Then, after 20 milliseconds, the trade is executed against the new auction book.

It's the 20-millisecond auction model that Ross and PDQ are heavily advertising to the buyside. As Ross tells it, that 20-millisecond pause while the order book is being built mitigates the "hit-and-run" speedy trading tactics of the high-frequency traders by making them commit their orders first.

"We'll be able to build liquidity during the pause," Ross said, "as it mitigates the speed race for the HFTs and places the emphasis on size improvement."

As part of the ATS's drive to bring in more buysiders and execute more blocks, it has brought on two former senior New York Stock Exchange execs to help build a client book. Peter Jenkins and James Ross joined as part of the firm's push into the institutional equities business.

Jenkins joined PDQ from AX Trading Group, where he served on the board of directors and as president, overseeing business development and institutional sales. Jenkins, a veteran with 30 years of financial experience, also ran NYSE Euronext's institutional relationship management effort and served on the management committee.

James Ross, a 25-year veteran, also came from AX ATS, where he most recently served as chief operating officer. Prior to that, he was CEO of an enterprise equity crossing business called MatchPoint Trading, which was acquired by NYSE Euronext to replace its legacy equity crossing facilities.

Both Jenkins and James Ross report to chief executive Keith Ross.