Highly active, sophisticated traders with short trading horizons should benefit from a new alternative trading system, say Citi officials.
The new venue, called Citi Cross, is an alternative trading system, that is a dark pool designed to buy and sell orders from traditional investors and financial institutions with highly actively trading flows, Citi officials claim.
So how does Citi think it will bring in these traders now?
The platform is built for high capacity and high performance. “We also wanted to come up with a crossing mechanism designed for clients that have historically been apprehensive about interacting with” high-speed traders that issue large amounts of orders and cancellations, says Hannes Greim, head of Citi Cross ATS, referring to these active traders.
Who are these active traders?
“That’s a trader that generally has a higher performance requirement for a trading platform and, until now, we have not been able to accommodate” them, Greim adds. So they are traders with active trading styles; those who may be trying to count profit before the day is out, rather than the average retail or institutional investor, with horizons that last months or years.
Citi Cross contains an allocation matching algorithm that will change the usual dark pool selection process. Normally, the first orders at a price point are the first to be executed, Greim says.
With Citi Cross, any order, instead of the time priority system, every participant qualifying at a price point receives equal treatment, Citi officials say. Citi Cross, they add, will find the point in the spread that will maximize the number of shares that are matched in a single print.
Which orders are they? Any order within that price point is included in the cross.
“Citi Cross offers an alternative to the latency arms race by removing the notion of the queue position,” Citi officials said in a press release.
Citi Cross will serve a wide range of demanding traders that Citi has not been able to attract because they questioned its ability to solve their unique trading problems, Citi officials say.
Greim says Citi Cross will allow for more trading interaction.
“We believe it is a win-win for everyone,” Greim says, “because we want to create a venue on which the traditional and retail flow can comfortably interact with the active trading styles.
“Citi Cross levels the playing field,” says Dan Keegan global head of cash equities for Citi. He adds that the active traders provide a high quality of liquidity that, in turn, helps the quality of the fill of the retail and institutional client.
Who are these active traders who have shunned Citi?
Greim wouldn’t say that Citi Cross is specifically targeting high frequency traders. That’s because he believes that the term is confusing and covers many strategies. However, he said the client would be someone who will place many daily orders and need to know quickly if any order has been canceled.
Highly active clients, Citi officials conceded, have been wary that Citi wasn’t fast enough to solve their market structure problems.