Search for Quality Block Liquidity Remains Critical

Ralston Roberts, Global CEO of Instinet Incorporated, said it is always a challenge to trade in large blocks, optimize price, and minimize the risks of information leakage and negative selection, all at the same time. 

Ralston Roberts

“This is especially true in lower liquidity or thinly traded stocks, in event-driven situations, and in markets where liquidity is aggregating around certain key times of day,” he told Traders Magazine.

On December 1, Instinet announced the Canadian launch of BlockCross, a workflow solution for managing block trading in securities.

Roberts said that the Canadian markets have been steadily growing in volume over the last ten-plus years, adding that there is increasing interest in conditional order types in that market.

“With conditional order and blotter integration functionality, and access to unique, diverse liquidity from our agency desks and algo business, Instinet BlockCross offers buy-side clients with opportunities to cross with natural liquidity from counter-parties that the client may preference, and set up order management parameters that suit their specific trading styles and workflows,” he said.

According to Roberts, Canadian markets was the next logical step to launch BlockCross, following Instinet’s launch of BlockCross in EMEA at the end of 2019, and the original acquisition of BlockCross for US stock trading in 2017.

“After hearing from our clients who actively trade Canadian securities, we came to believe that the unique capabilities, controls, and trader-specific “personalization” made available in BlockCross would be beneficial to their search for best execution,” he said.

In the spring of 2021, Instinet introduced the capability to trade conditional order types in its Canadian ATS, Instinet Canada Cross (ICX). 

“We had significant uptake by our subscribers, because conditional behaviors are becoming increasingly important to algorithmic strategies and orders that are price-sensitive,” he said.

In the fall of 2021, the firm introduced the ability to trade Canadian securities through its BlockCross trading desktop technology, and began extensive testing. 

“We were very pleased with the results, so we launched the offering officially on December 1,” commented Roberts.

Optimizing price and size is one of the reasons that the conditional order management and the blotter integration technology found in BlockCross has been so beneficial to clients, according to Mark Govoni, President of Instinet and Head of the Americas.

Mark Govoni

“By automating integration of their interest with conditional orders, they can continue to actively work orders in the markets while passively seeking larger sized blocks in BlockCross,” he said. 

“That makes it possible to increase the odds of capturing unique, non-displayed liquidity in sizes larger than may appear to be available on the lit markets,” he added.

Govoni said that BlockCross has the ability to source incremental unique, natural liquidity from Instinet’s agency desk, by way of the platform’s Agency IOI feature.

Govoni added that since dark conditional orders are not visible pre-trade, traders can submit larger resting orders with reduced risks that they will signal or trigger market movement before their order has executed. 

He pointed out that BlockCross offers “unique functionality and access to depth of liquidity”, which creates opportunities to execute large trades efficiently and anonymously, minimizing market impact. 

“And clients may actively manage the counter-parties with which they prefer to interact – which adds yet another layer of signaling risk mitigation,” he added.

Roberts further said that one of the things Instinet’s clients most appreciate, is that BlockCross’s proprietary blotter integration allows them to tailor interactions from their own front-end. 

“The nimble GUI can configure pop-up alerts, respond to natural flow, set auto-execution instructions, blast interest to preferred counterparties, and optimize blocks,” he said. 

Clients can integrate with Instinet’s advanced algos, and view real-time market analytics. 

Access to BlockCross is also easy – through most OMS/EMS providers – including Instinet’s own Newport EMS, plus Instinet’s algorithms, or FIX connections.

“We’ve been rolling BlockCross out on a market-by-market basis, so that the technology can be specifically tuned to the micro market structure of each one. That means BlockCross enables the client to remain compliant with local and/or regional regulations and market landscape,” Roberts said.