Global broker Citi is to launch a US crossing network called Citi Cross, which will match trades from retail clients with high-frequency trading (HFT) flow. A spokesperson has confirmed that it is currently in beta testing and will be launched at the end of the year.
All of Citi's retail order flow in the US is currently passed though Citi Match, the broker's crossing network, prior to being put on the open market via Citi's market-making business. Citi Cross will take retail orders that are unfilled by either and match them with flow from HFT clients. The broker will prevent HFT firms from using certain strategies, for example latency arbitrage, on Citi Cross.
The US equity market has been characterised by low trading volumes in the first half of 2011, which has driven lit trading venues to become more aggressive in attracting business from liquidity providers including HFT firms.
A number of markets in the US have adjusted their pricing models recently to boost the provision of liquidity. On 5 July Direct Edge reversed the taker-maker model on its EDGA exchange; from 1 August, the exchange will offer a maker rebate of 0.00005 for adding liquidity, while levying a taker charge of 0.00006 for removing liquidity.
BATS Exchange proposed a change to its fee structure on 12 July, increasing its standard fee for removing liquidity from $0.0028 to $0.0029 while adopting two volume-based tiered fee structures, based on average daily volume (ADV), that will allow members to achieve higher rebates for adding displayed liquidity.
In its filing to the Securities and Exchange Commission, BATS noted that volume-based tiers are were based on “the value to an exchange's market quality associated with higher levels of market activity, such as higher levels of liquidity provision and introduction of higher volumes of orders.”
It will also allow affiliated entities to aggregate their order flow for the purpose of the exchange's determination of ADV.