Buyside traders who execute options trades can now do it electronically – and tap capital from another party to help manage their exposure.
The new options algorithm, from Convergex, is dubbed Capital Commitment Crossing, and allows liquidity providers the choice of a “Minimum” or “Maximum” touch rate when trying to source blocks for its clients.
According to Convergex, the algorithm gives liquidity providers a new level of control over how they manage their own exposure as they facilitate block trades on behalf of their options customers.
See Also:Convergex Announces Buy-Write Algorithm, Blending Stock and Option Execution
“We’re pleased to be able to respond to client demand for more control over how they facilitate options orders on behalf of their own customers,” said Ben Londergan, Convergex’s executive managing director and Head of Options Trading and Technology. “This cutting-edge algorithm allows institutional desks to put up their customer facilitation options trades electronically with a new level of customization.”
Liquidity providers can use the Capital Commitment Algorithm to customize their interaction with the marketplace when facilitating customers’ options orders, taking into account factors such as the price committed to such customers and the liquidity providers’ existing positions or capital constraints.
The Capital Commitment Crossing Algorithm offers two different “touch rate” paths for liquidity providers to manage how much of a given block trade they internalize.
The first is (CAPMAX) Maximum Cross. This setting is used to maximize touch rate, this option allows traders to sweep all protected quotes before proceeding to facilitate the balance of a block order at one or more exchange auctions.
The second setting is for (CAPMIN) Minimum Cross. This setting is used to minimize touch rate, this option utilizes Convergex’s Pulse options algorithm to source as much liquidity from the open market as possible before facilitating the balance of the block order.
