Goldman Sachs, with the industry’s biggest dark pool under its belt, now plans to add point-in-time crosses and new crossing functionality within Sigma X, its alternative trading system.
Rishi Nangalia, head of business development at Goldman Sachs Electronic Trading, said Goldman plans to add four new types of crossing to its platform. These are point-in-time crosses, benchmark crosses, portfolio-based crosses and enhanced block crosses. All are expected to take place within Sigma X.
Greg Tusar, head of Goldman Sachs Electronic Trading, said the broker hasn’t decided how many intraday crosses it will launch. However, he said, clients have suggested fewer crosses rather than a bonanza of timed crosses “because then they’re more meaningful.” Point-in-time, or timed, crosses aggregate liquidity and execute matches at scheduled times during the day.
Nangalia added that existing liquidity in Sigma X would be able to interact with order flow submitted for the timed crosses. The pool executed a daily average of 127 million shares in April.
The point-in-time crosses would likely take aim at ITG’s successful POSIT product, which aggregates liquidity at 12 scheduled times during the day. ITG’s managing director Chris Heckman, who said POSIT’s success is based on the quality of its institutional block liquidity, noted: “Broker-owned ATSs are clearly facing the challenge of standing out in an already crowded market.”
Goldman may consider allowing other brokers beyond those whose algos have reciprocal dark-pool access with Goldman’s algos to send orders into its scheduled crosses, Tusar told Traders Magazine. Goldman, Morgan Stanley and UBS this week announced a series of bilateral arrangements whereby their algos that scout for dark liquidity can now access one another’s dark pools. The brokers’ algos can rest orders within each other’s dark pools to match up with resident or pass-through flow in those venues.
Goldman plans to develop Sigma X by starting with a point-in-time cross and then adding portfolio-trading functionality within the dark pool. Customers would be able to submit portfolios to Sigma X for crossing with dollar-neutral and sector-neutral constraints.
The broker will also provide benchmark-based crossing capabilities within its dark pool. Customers using this functionality could cross orders at, for example, the volume-weighted average price or time-weighted average price for a full trading day.
Regarding the expansion of its crossing services, Tusar stressed that Goldman is currently “researching and developing the functionality.” He said he doesn’t expect any of these offerings to be available for several months.
