BIDS Sees Bump in Trading Volume
Traders Magazine Online News, April 16, 2010
BIDS Trading's precipitous rise in volume is due to a number of factors and no single initiative, according to the firm. At the end of the first quarter of this year, BIDS's trading volume was up 57 percent over the same period in 2009.
Tim Mahoney, BIDS Trading
An anonymous crossing network that is owned by a consortium of brokerages, BIDS executed 28.7 million a day on average--double-counted--for the first quarter, which just ended, according to the firm. In January, it reached 32 million shares a day, breaking its previous record of 27 million shares, set last October. Just this past week daily volume hit 53 million shares, surpassing the previous record of 46 million set on April 7.
One new wrinkle is that BIDS has been rolling out an interface over the last six months that lets the buyside connect directly to the system. Brokers, meanwhile, have begun aggregating the unexecuted portion of algorithmic orders and putting them into BIDS as blocks, making it easier to hit minimum size parameters that the buyside places on counterparties. Combine those two factors with the buyside's need to pay big brokers for their research, and BIDS chief executive officer Tim Mahoney thinks his firm has the wind at its back.
"What's changed at the margin is, we have this buyside product now that's helped us increase buyside traders' usage," said Mahoney, a 30-year veteran and former buyside trader. "I want to empower the buyside trader--give him the tools he needs."
Despite its growth, BIDS still lags longtime block-crossing stalwarts ITG Posit and Liquidnet. Execution statistics from Rosenblatt Securities for February show that BIDS executed 14.6 million shares each day--single-counted. In February, Posit executed 27.9 million shares, Rosenblatt estimates, while Liquidnet traded 24.6 million shares on average for the same period. Both printed roughly twice as much volume.
Still, BIDS's average daily volume for February represented a 97 percent increase over the same period a year earlier, according to Rosenblatt's latest report. But its average trade size was only 386 shares in February. By comparison, Rosenblatt wrote that Liquidnet's average trade size was 53,864 shares, Pipeline's 48,565 shares (estimated) and ITG Posit's 6000 shares (estimated).
Most recently, BIDS rolled out its BIDS Trader software, which allows the buyside to connect directly to the crossing network. That has helped pump up volumes, Mahoney said, because buyside orders previously were routed to the ATS via a broker-dealer.
Mahoney's buyside experience has been a major benefit, said Joe Gawronski, president and chief operating officer at Rosenblatt Securities. "People know and respect Mahoney," Gawronski said. "He understands the mind-set of the buyside trader, and that is a pretty big differentiator."
Establishing connectivity to the buyside wasn't easy. Buyside traders, according to Mahoney, like to have their uncommitted orders sit in their own order management system. The problem was, it had no software system to connect the ATS to the buyside.
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