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Inside Trading
Primary Market Still Guides Open
James Ramage
Most traders are filling their customers' orders in New York Stock Exchange-listed securities at the NYSE's opening price-not Nasdaq's.
Since it began opening in NYSE stocks last July, Nasdaq OMX so far has gained almost a 5 percent market share at the opening. So when there are two prices to choose from for morning orders that arrive prior to 9:30 a.m., traders have been going where the volume is.
BTIG Bonds With Goldman Sachs
Peter Chapman
Agency brokerage BTIG LLC, following an investment last month by Goldman Sachs, is poised for growth.
The bicoastal broker-dealer, co-headed by a former Goldman trading executive, accepted a minority investment from the bulge bracket bank in order to bolster its image abroad and set an initial valuation for the firm.
ISE Calls for Move to Pennies
Nina Mehta
The International Securities Exchange, in a turnaround, is now calling on the options industry to forget the penny pilot and move directly to penny quoting across the board. But the recommendation comes grudgingly, since the ISE did not previously favor penny quoting for all options.
Gary Katz, the ISE's chief executive, says the new stance was driven by the Securities and Exchange Commission's approval of the Nasdaq Options Market, whose rules include the ability to maintain hidden quotes in penny increments in non-penny names. That means Nasdaq could have better prices than other exchanges in some options, although those prices would not be displayed publicly to investors and other exchanges.
GETCO Aims Toward Options
Nina Mehta
GETCO, one of the largest providers of liquidity in equities, plans to step up its participation in U.S. options. Brian Nigito, an executive at GETCO, said his firm is currently "underrepresented in options."
Speaking at an industry conference in Las Vegas in early May, Nigito said GETCO could make a go of trading options on an exchange employing either price-time priority with maker-taker pricing or the traditional pro-rata dealer model with customer priority. In
Sellside and Buyside Have Different Views on Speed
Peter Chapman
Faster trades. The buyside wants them. The sellside doesn't see the value. That's one of the conclusions of a new survey released by the Securities Industry and Financial Markets Association (SIFMA) covering electronic trading of equities in Europe.
In general, the buyside and sellside agree on the major challenges facing buyside desks, including, access to liquidity and EMS/OMS integration.
NYFIX Expands IOI Reach with Acquisition
Nina Mehta
Almost two years after rolling out its first indications-of-interest (IOI) product, NYFIX is upgrading its offering to cater to the changing needs of big traders. As part of this effort, NYFIX last month purchased FIXCITY, a U.K.-based technology firm, for $6.6 million in an all-cash deal.
"This will accelerate our liquidity-seeking and liquidity-aggregation capabilities and hence our ability to execute orders for clients," chief executive Howard Edelstein told Traders Magazine.
Block Firm to Trade Distressed Debt
Michael Scotti
Agency shop JonesTrading, known for its large network of equity sales traders, has expanded into a new asset class-distressed bonds. JonesTrading last month began trading the illiquid bonds of troubled companies for two reasons: First, customers demand was strong; and second, it believes that bond trading is migrating toward the equities model of agency trading-particularly distressed bonds.
According to Moody's Investors Service, the recent credit crunch and slowing economy have already pushed bond defaults way up-about five times what they were last year during the same period, or $1.4 billion last year compared to $7.27 billion this year. Consequently, it shouldn't come as a surprise that JonesTrading sees distressed bonds as a growth area for the firm.
Big Blocks...Trading a Little at a Time?
Michael Scotti
At Credit Suisse's AES Equity Derivatives Trading Forum in Miami at the end of February, Rob Maher, who heads AES sales in Europe, made the case in a presentation that trading lots of small orders algorithmically is often more efficient and cheaper than going the traditional block route. However, not all block traders have caught on. Maher offered a summary of buyside traders' common complaints regarding block trading.
Dark Pools Eye Retail Flow
Nina Mehta
Large broker-dealers that operate dark pools are falling over themselves to attract retail flow. Because retail-size orders are now larger than the average executed order in the market, their presence in dark pools is coveted. The scramble for retail flow is also enabling some dark pools to boost their executed volume at a time of increased dark-pool competition.
Credit Suisse in December launched what it calls its CrossFinder Retail Network, an initiative to accumulate and pass retail flow through CrossFinder, the broker's ATS, to match up against resting institutional orders. Credit Suisse has about a dozen retail brokerage clients, according to Dan Mathisson, head of the firm's Advanced Execution Services group.
ECNs Encroaching on Exchange Turf
Nina Mehta
All eyes are on BATS Trading and Direct Edge. Will the Securities and Exchange Commission grant the two biggest ECNs the much-coveted exchange status they both want? If so, will the exchanges leverage their newfound powers to grab more share from NYSE Euronext and Nasdaq OMX? And what about the value of exchange licenses? Will approval herald a flowering of new exchanges, devaluing the status of the smaller players already in the club?
Dark Pool Consolidation Debated
Peter Chapman
There are upward of 40 dark pools out there. Will their numbers grow, shrink or stay the same in the coming years? The experts disagree. Some believe the number will decline as less-efficient players drop out and exchanges exert their dominance in the provision of anonymous trading services.
Buyside Asks for "Honesty"
Peter Chapman
Buyside traders, in the wake of actions taken by the Financial Industry Regulatory Authority, are imploring their brokers to act honestly when they advertise their completed trades.
Their pleas come following FINRA's decision to fine 19 broker-dealers a collective $2.8 million for overstating the amounts of their completed trades in their advertisements over the systems of three service providers. Those fined included Merrill Lynch, Bear Stearns and Deutsche Bank.
Buyside Stymied by Dark Pools
Peter Chapman
Dark pools are more trouble than they're worth.
That's the sentiment of some members on the buyside, who lament the electronic crossing systems' lack of transparency, low crossing rates, exclusivity and sheer numbers.
Speed of Trading Leaves Some Traders Behind
Peter Chapman
The speed of trading is getting so fast that trading in microseconds is expected to soon become a reality. The trend promises to benefit some traders at the expense of others.
With algorithmic traders demanding faster turnaround times, exchanges and ECNs are beefing up their trade processing capacity. Turnarounds under 10 milliseconds are fast becoming the norm, and exchange officials predict the numbers will go even lower.
AQUA Opts for Maker/Taker Pricing
Nina Mehta
AQUA Equities, a new alternative trading system for block trades that launched in December, is zeroing in on exchanges and ECNs. Rather than compete head-to-head with other dark pools, the eSpeed spin-off, owned by eSpeed and Cantor Fitzgerald, seeks to grab flow from the displayed markets by mimicking their pricing strategies.
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