SunGard has decided to throw its hat into the crowded dark pool ring. The vendor on Monday launched Assent ATS through its Assent broker-dealer division.
To establish a beachhead in a space with upward of 40 competitors, the dark pool will combine retail, institutional and high-frequency order flow from its Brass order management system users, as well as its Assent and GL Trade brokerage customers, said Chris Lees, vice president of SunGard’s Assent Liquidity Services.
"We believe that the Assent ATS will be an attractive proposition and venue for our clients, and we hope to win their business on the basis of liquidity, ease of access and overall cost," Lees said.
The dark pool becomes part of the electronic broker Assent’s overall offering, including its smart-order router, algorithms, direct market access and its dark pool aggregator. More importantly, it integrates into the Brass OMS. And in doing so, according to the firm, it should ease access for the OMS users to the ATS and ultimately help them reduce transaction costs.
This is important, for SunGard is counting on its Brass users to provide the necessary liquidity to get the Assent ATS off the ground, as well as to attract new users.
But will Brass users participate? One of them, Stephens Inc., in Little Rock, Ark., plans to give it a try. The brokerage has scheduled to meet with SunGard reps on Tuesday to get the formal introduction to the dark pool, said Leon Lants, senior vice president, managing director and head of Stephens equity trading.
The brokerage uses Assent for some sponsored access, dark aggregating and smart routing, Lants said. It doesn’t yet use Assent for its algorithms.
Stephens’ plan is to try the ATS out gradually and weigh the results. Ultimately, Lants is wary about relying completely on just one firm for its connectivity, compliance, order routing, sponsored access and smart routing.
"I understand the advantages and potential synergies that are created," he said. "I also need to make sure I’m responsible to our obligations … that this is advantageous to our customers, and not just me, in the process. Certainly, it’s easier to just use this one system to touch everything. But I’m trying to at least think through the potential ramifications of all of it."
Pricing is another crucial factor for success in the dark pool space, according to Joe Gawronski, president and chief operating officer at Rosenblatt Securities. Rosenblatt follows dark pools trends and volume in a monthly newsletter.
Pricing Assent ATS well will give SunGard its best chance at success in the early going, he said. "What is SunGard going to charge for this? That’s a big question," Gawronski said. "If it’s very cheap pricing, that’s going to be much more appealing to a sellside audience that’s very margin-conscious in this environment than if they’re going to try to price it higher."
SunGard wouldn’t disclose its pricing, beyond saying it would be "competitive." Nor would it disclose how much volume it receives from each of its business lines. SunGard also wouldn’t give projections for Assent ATS’s growth.
Assent ATS will support three core trading strategies, Lees said. In the first, brokers enter an order into the pool to wait for executions from liquidity that is passing through the ATS. Assent ATS also supports an order designed to execute in other dark venues, Lees said. SunGard will manage these orders by splitting them between its own pool and routing them to other dark pools to execute them.
The third strategy works for clients seeking dark executions prior to going to a displayed market, Lees said. In this, a client could send an order to the Assent ATS to seek liquidity there before routing it on to a Nasdaq or a BATS.
"These are all execution strategies that are designed to re-aggregate this fragmented world that our clients live in," Lees said.
Assent ATS is not SunGard’s first attempt to leverage its Brass users. In the early part of this decade, SunGard operated an ECN called Brut–which stood for Brass Utility.
SunGard’s positioned Brut to gain business from Nasdaq market makers who were Brass users. Through cheap pricing, SunGard marketed Brut as a utility. But Brut failed ultimately to gain any lasting traction. It later became part of Nasdaq.
The Assent ATS is also not the first dark pool SunGard has offered Brass users. In May 2008, Susquehanna Investment Group launched RiverCross ATS, an agency-only dark pool designed initially for block and non-block flow. Its aim was to target the sellside through a relationship with an OMS maker as a way to access a broad customer base right out of the box. It chose SunGard’s Brass.
The dark pool is owned and run by SIG but operates independently through a separate broker-dealer called RiverCross Securities. SunGard hosted the RiverCross technology. As of press time, SunGard said relationships with other ATSs would continue, but would not elaborate.
"SunGard has and will continue to work with other ATSs to deliver liquidity and price improvements to its customers," the vendor responded, "and to provide services to our valued exchange and ATS customers."