Dark pools aren’t just for equities any more. Fixed-income securities are getting closer to trading off exchange, much like their equity cousins.
Agency-only broker and technology vendor ITG has updated its Form ATS for the POSIT dark pool to include a section dedicated to and outlining the trading of fixed-income securities. ITG announced earlier this year that it was launching a fixed-income version of it’s POSIT dark pool later this year.
Initially, POSIT fixed-income will trade U.S. corporate bonds. However, with the Form ATS updated ITG could include other fixed-income classes for future trading.
The new section on fixed Income is on numbered pages 26 to 34 of the Form ATS.
Frank DiMarco, ITG’s director of fixed income electronic brokerage, said that given the current state of the fixed-income market and concerns around liquidity in certain cash bond securities, clients have asked ITG to consider entering the space.
“After considerable analysis, ITG has decided to enter the FI market to create a “dark” liquidity pool for U.S. Corporate bonds,” DiMarco said. “Leveraging our existing POSIT and ALERT capabilities along with our proximity to buyside blotters, ITG will enter the market with a quarter four launch.”
DiMarco added ITG has created its own pricing engine, which will price approximately 14,000 corporate bonds every minute – this is a key differentiator in a market which is over-the-counter and traditionally run via a RFQ (request-for-quote) system.
Also, POSIT will contain 2 crossing features focusing on trades $1 million notional or greater:
1. Scheduled matches – used to build episodic liquidity at specific times of day to cross blocks.
2. Continuous Crosses – Allows users to anonymously conduct a bi-lateral anonymous negotiation.
ITG will act as a “riskless principal” (counterparty) to all transactions in order to maintain anonymity throughout pre and post trade life cycle.
“Clients will benefit from reduced savings of bid/ask spread, lower transactions fees, no information leakage and the ability to work large blocks at their levels throughout the course of a day,” DiMarco said.
The offering will be available via the POSIT Alert portal and via FIX connection and will also be integrated with several third party order management systems.