Barclays now offers U.S. traders the ability to tap the broker’s capital when executing an order via select algorithms.
The new functionality is a first via an algorithm according to Barclays. The firm also claims this will help the buyside find the liquidity it needs faster, transferring risk away from the institutions by allowing the bank to either buy or sell equities to complete a trade.
Clients must be entitled by Barclays before they can use the capital commitment feature, Bill White, head of equities electronic trading told Traders Magazine. Once set up, clients can select the feature on a per-order basis via box on their algo order screen. White said the capital commitment feature is currently available in its most popular algorithms, Hydra and VWAP.
“With a click of a button on their EMS, the buyside trader puts in his inputs and that’s it,” White said. “This is really about simplifying clients’ work flow, assisting in liquidity capture and execution risk management, all at the push of a button.”
Here’s how it works. Once a trader clicks the capital commitment button, a portion of the client’s order is eligible for capital commitment, thereby providing the client with instant liquidity as well as saving them the execution cost associated with that portion.
For example, the client puts order into Hydra and clicks the commitment button. The order gets routed and begins to trade until it reaches the percentage of capital commitment, such as 35 percent. This remaining 35 percent balance is crossed at bid-offer spread and transferred to the broker’s cash desk for handling.
White added that the broker determines the level of capital in advance with each client based on liquidity needs, monitoring it real-time and on a per-order basis. As Barclays sees fit, it can reduce the amount of capital, increase it or possibly shut it down.
Barclays is offering this capital commitment feature in all U.S. stocks in which it makes markets, White said. Currently, the broker makes markets in about 4,000 securities.
Barclays plans to roll out the automated capital commitment feature next in EMEA equities as part of its ongoing development of its global electronic trading platform.
The firm “soft-launched” the feature with a small group of clients and is now rolling it out to more. It works in tandem with capital eligible clients to get them using the feature. White added he expected the feature will be used by more clients and possibly in more types of algorithms. Expanded algorithm usage is dependent on the features’ success in the Hydra and VWAP algos.
This follows Barclays revamping of its electronic products and service was previously reported here in Traders Magazine. In October 2012, the broker began reporting its electronic trade volumes for U.S. equities on Bloomberg.
More recently, the firm launched DirectEx, a registered ATS for actionable indications of interest, built to help clients find and execute block trades. Barclays mainly distributes its actionable IOIs through the Bloomberg IOI network.
