In a nondescript part of Manhattan, a new ATS is springing to life.
Away from the historic canyons of lower New York Citys vaunted financial district and yet away from Midtowns glitz of steel, glass and facades. Richard Suth, formerly of Goldman Sachs, has quietly entered the alternative trading system space. His soon-to-be registered ATS and eventual US dark pool, OneChronos, is looking to be a one-stop shop pool of liquidity for all traders and all asset classes.
In a recent article on Traders Magazine, several buy-side traders stated that they wanted their vendors and other service providers to be a one-stop shop where they could get more than just orders executed or trade-cost analysis done. Furthermore, they wanted an open API type solution that afforded them the opportunity to plug in whatever systems or trades, regardless of asset class, into a solution. This would allow traders to operate more efficiently, save money and increase best execution. Suth said that is his mission and OneChronos.
This (trend) is one thing we are directly addressing by matching trades across multiple geographies and asset classes/products in one place, Suth told Traders Magazine in an interview. We want to bring the execution to the next level by allowing not just individual symbol orders but combinations of orders across asset classes that contain constraints and contingencies.
He explained that OneChronos features ‘combinatorial’ auctions, developed in-house, that were developed as smart markets to allow participants to directly express their true intent via a firm order and not just use algorithms to approximate it. Therefore, a trader can enter an order to buy Amazon in Euros and/or US Dollars as a single order with one price and whatever quantity constraint they want.
You will only be filled when that constraint is met, Suth said. Thats it.
So, how does it all work exactly?
Combinatorial auctions let market participants express contingencies between and constraints on how their orders are matched. According to Suth, it’s a better way of accomplishing what algorithmic, block, and program trading does today. The system uses match constraints to eliminate legging risk, opportunistically net down hedged positions, and minimize information leakage.
OneChronos is deploying points of presence (POPs) for order entry and market data distribution around the globe. Its order entry paradigm and distributed systems IP uses high precision timestamping to render competition over proximity, network routes, and market data handling moot. This also allows for combinatorial trading across all geographies and asset classes.
Moving ahead, as more of the buy-side migrates or seeks out the one-stop providers, such as Thomson Reuters, Suth sees demand for his model and ATS continuing.
I agree that this shift will continue, he said. I spent a lot of time at Goldman Sachs consolidating desks and trading risks and its far from over.
The OneChronos ATS plans on launching a US dark pool offering agency-only matching of NMS equities in 2018 followed by European equities (via a Periodic Auction MTF) and additional asset classes.