New SocGen BCN favours institutional orders
Société Générale Corporate and
Investment Banking has launched AlphaY, a new broker crossing network (BCN)
that will prioritise client orders and offer execution at three price points.
The new dark pool will be the
second to go-live in the space of a week, following the launch of agency broker
CA Cheuvreux’s multilateral trading facility (MTF) BLINK MTF last Monday, emphasising
the demand for new and innovative non-displayed trading functionality.
In addition to client orders,
AlphaY will include flow from SocGen’s single stock sales trading desk,
incorporating a wider range of liquidity than AlphaX, the firm’s existing
internal dark pool that only includes trades originating from algorithms. The
firm currently executes an average of €110 million per day in in AlphaX.
Execution of client orders
will be prioritised over internal orders in AlphaY and members can choose to
cross at the bid, mid or offer. Trade prices will be based on a consolidated
best bid and offer compiled from an amalgamation of stock prices from the
primary market and MTFs BATS Chi-X Europe, Turquoise and Nordic-focused
According to Richard Hills, global head of quantitative electronic services,
SocGen, the launch of AlphaY
as a BCN will help the French bank maintain closer control of the liquidity in the
venue. Unlike MTFs, BCN operators can decide who accesses their pool and how
orders are matched.
“We didn’t think that running AlphaY as an MTF would allow us sufficient flexibility to police
the flow,” Hills told theTRADEnews.com.
“We don’t think pricing is sufficient to control participation. Being a BCN
also allows us to remove participants from the pool if we don’t like their
trading behaviour, which would not be possible if AlphaY was an MTF.”
Hills added while SocGen
offers DMA, it does not offer co-location or other services geared towards
high-frequency trading strategies, meaning these types of participants would
not be present in AlphaY.
AlphaY will offer trading in
4,500 European names and will be underpinned by a platform developed by NYSE
Technologies, the commercial technology unit of transatlantic exchange NYSE
Euronext that also supplies the trading engine for Goldman Sachs’ Sigma X MTF.
Hills said one of the main
benefits of using NYSE Technologies was the firm’s ability to help SocGen
better react to any further regulatory changes in MiFID II, such as the
outlawing of BCN, or at the very least a recalibration of the venue category. If
AlphaY were required to become an MTF under MiFID II for example, the vendor
would be able to update the platform using existing, compliant technology.
“If the BCN construct is not
allowed, our relationship with NYSE Technologies will allow us to provide access to the pool directly via their SFTI network and incorporate the required
surveillance for an MTF,” said Hills.