While electronic block trading platforms accounted for just over 1% of the trading volume in the US equities markets in 2003, this rose to 4.5% in Q2 2007, finds a new report published by research and advisory firm Aite Group. Aite Group puts this growth down in part to new platforms entering the market to challenge the incumbents.
The investment bank-backed Block Interest Discovery Service (BIDS), in particular, has 'upped the ante' in the block trading market, notes the report entitled, 'Block Trading: BIDS Ups the Ante'. The emergence of the BIDS alternative trading system (ATS) is forcing other market participants to "come up with innovative and bold responses or risk being left behind the competitive curve," according to Sang Lee, managing partner, Aite Group, and author of the report.
"With the launch of BIDS, price compression appears inevitable and, within two months of existence, the block trading utility has already shown signs of challenging the status quo," comments Lee.
According to the report,
electronic block trading has become increasingly competitive over the last 12 months. Among the trends emerging are 'open approach' platforms allowing buy-side and sell-side order flows to interact, the introduction of products designed to increase fill-rates of client orders, and the globalisation of block trading platforms.