Appital, which automates equities bookbuilding, is being integrated into the FlexTradeEMS which should lead to more efficient discovery of liquidity and the evolution of block trading.
The bookbuilding platform will be fully integrated with FlexTRADER EMS allowing buy-side firms to discover liquidity more efficiently and giving them the ability to execute on Turquoise, the London Stock Exchange Group’s pan-European multilateral trading facility.
Dr Robert Barnes, chief executive of Turquoise Global Holdings & group head of securities trading at London Stock Exchange Group, told Markets Media: “The great efficiencies through the FlexTrade EMS, the beautiful innovation of Appital and the single point of entry for straight- -through-processing into more than 20 settlement destinations through Turquoise allows customers to do more with what they have, so this is the next step in the evolution of block trading. I feel very confident that the appetite for the new sources of liquidity and our new infrastructure will serve a whole suite of new trading use cases.”
Mark Badyra, chief executive of Appital, explained that traditionally a broker sits between buy-side participants and calls around the market to build up a book of demand from potentially hundreds of orders in order to price a transaction.
Appital allows investors to handle that entire process through direct access to the platform. Buy-side traders looking to execute large orders in excess of five days average daily volume, including in highly illiquid, small and mid-cap stocks, have real-time visibility, full transparency and maximum control over the bookbuilding and deal distribution process.
“Because we’re not a broker, we have a unique relationship with buy-side participants whereby they can disclose on our platform what they are interested in and find latent liquidity that would otherwise be left unfound,” Badyra added.
Investors can discover new sources of liquidity by providing Appital with a specific list of things they would like to buy and the platform can also capture preferences or profiles, such as interest in mid-cap European equities. Appital uses that data when the deal originator comes onto the platform to target the pockets of liquidity within the watchlists and profiles.
“Demand is built algorithmically and allocation is also very systematic, so we are promoting best execution for both parties as they are exposed in the market for a much shorter period of time,” said Badyra.
When Appital went out with its test product, the buy side wanted to integrate the platform with their EMS platforms, which are their mission control, for seamless execution of workflows.
Badyra said: “FlexTrade is the notification centre for any potential liquidity for a buy-side participant and already a recognisable part of their workflow which they understand how to use.”
Andy Mahoney, managing director EMEA FlexTrade Systems, told Markets Media that a couple of clients had got in touch to ask if FlexTrade was looking at Appital and he said it became clear that the firms needed to work together to define a specification.
“The key for any technology delivery is to have a seamless user interface so we worked very hard to make sure that we represented the workflow as best we could and we used feedback from some of our largest clients as part of an iterative development process,” added Mahoney. “FlexTrade has no interest in building proprietary protocols so we used open source standards such as FIX and FDC3 to build a good protocol and workflow which is seamless for clients,”
The Financial Desktop Connectivity and Collaboration Consortium (FDC3) was founded by OpenFin in 2017 in collaboration with major industry participants to enable universal connectivity and standards across all desktop applications.
OpenFin was launched to provide a desktop operating system to provide standardization across capital markets desktops so that the industry can deploy new applications more quickly and they will be interoperable, similar to the Android or iOS operating platform for mobile phones. The OpenFin app store incorporates FDC3 App Directory standards allowing all applications to be automatically discoverable and form part of the user’s workflow.
“This trading is already happening through a manual process so we wanted to make sure that the process is efficient, integrated with the client’s workflow and easy to roll out so there is no barrier to entry for them to get this onto their desktop,” added Mahoney. “We have a shared client list of about nine or 10 firms for the launch.”
September 2021 is the fifth anniversary of Turquoise signing the cooperation agreement with Plato Partnership, the not-for-profit industry group representing asset managers and broker-dealers which aims to improve market structure and achieve better results for end-investors.
In 2016 Plato announced the creation of Turquoise Plato which brought together the buy side, sell side and a trading venue in a formal agreement to increase efficiencies and reduce costs in anonymous European equity block trading.
Barnes said: “We have executed over €1.1 trillion, single counted. Investors have benefited from over €1bn of value – saving an average of19 basis points implementation shortfall per block.” *
He continued that when Turquoise Plato started trying to solve the puzzle of electronic block trading, average trade sizes on order book were shrinking to below €0.01m with the electronification of markets.
“Now we get upwards of €20m to €25m as a single trade via Turquoise Plato Block Discovery,” Barnes added. “Appital will take us to another scale and the integration with FlexTrade provides a beautiful turnkey solution for the buy side and corporates while keeping brokers involved because they can use existing workflows to get their business done.”
The solution will be available in all the markets that Turquoise covers – UK, Switzerland and Europe and each new one that is added.
“We share values and a vision for a market structure that delivers efficiency and benefits to end investors, and Appital is really innovating in the space of automated bookbuilding to provide liquidity at a right price for enormous size,” said Barnes. “This is the next transition beyond Turquoise Plato Block Discovery.”
* Dr Darren Toulson, founder of LiquidMetrix – the independent venue performance analytics firm, reviewed the benefits of block trading as part of the new MiFID II landscape. His article published April 2018 concluded from objective analysis that “block orders executing on Turquoise Plato Block Discovery save an average of 19 BPS” of Implementation Shortfall