European multilateral trading facility (MTF) BATS Europe has released details of two new smart order routing strategies, Parallel D and Parallel 2D, which aim to achieve best price and fastest execution respectively.
BATS claims the new order router enhancement, available in the US as well as Europe, will provide participants with access to multiple market venues simultaneously.
The first release, Parallel D, which is available immediately, splits the original order into multiple orders and sends them at a single price to multiple market centres. Each price level will be exhausted before moving onto the next price level. The strategy is available on an optional basis to BATS Exchange members and BATS Europe participants.
“Parallel routing dramatically enhances our smart order routing capabilities, ensuring our participants have access to more choice when executing their trading strategies in the marketplace,” said Chris Isaacson, chief operating officer of BATS Exchange. “By simultaneously targeting multiple market centres, our participants will have the opportunity for faster order execution and increased fill rates, minimising implementation shortfall.”
Parallel 2D, which BATS plans to introduce later this year, routes to all price levels at all displayed market centres in parallel. This strategy aims to route enough size to each protected market centre to fulfil the displayed quotes until the order size is exhausted to the limit price of the order. If the entire order cannot be fulfilled with the displayed quotes the remaining quantity will be split among market centres using a BATS Europe over-allocation method.
“In Europe this move has particular significance for our participants, enhancing the only MTF-operated pan-European smart order router that routes to both lit and dark venues,” said Paul O'Donnell, chief operating officer at BATS Europe.
All Parallel smart order routing strategies can access pools of hidden liquidity in addition to displayed market centres, though this is optional. BATS smart order routing is available for all markets except in Ireland and Spain.
In January 2010, BATS Europe introduced its CYCLE routing strategy, which charges 0.5 basis points for routing to displayed venues and 0.3 bps for routing to non-displayed platforms. Orders are routed to pan-European market centres consecutively in search of liquidity at the best price points up to and including the limit price on the original order. While CYCLE leaves unfilled shares resting on BATS Europe until they are matched with an incoming order, a more aggressive strategy, RECYCLE, will target a locking or crossing quote at another market centre, matching or improving upon the limit price.