Following the disclosure of its recent execution results, agency-only broker EdgeTrade says that traders no longer feel restricted to seeking only capital commitment during times of heavy volatility. Between August and October, a daily average of 27.4% of its clients’ executions were completed in dark pools through FAN, the firm’s smart-order execution algorithm. This compares with a Tabb Group estimate of 9.4% of all US equity shares executed in the dark.
"This finding points to a major shift in how traders source liquidity," comments Joseph Wald, CEO, EdgeTrade. "No longer do traders, during times of heavy volatility and a perceived dearth of liquidity, feel restricted to only seeking capital commitment. With the right tools and market connections, they are looking to fill their orders in the dark without information and prices repercussions systemic to negotiation with a trading desk. The significance of this change of attitude and behaviour cannot be underestimated. The market is evolving and we have the technology to enable traders to exert greater control and directly effect more advantageous outcomes in their favour," explains Wald.
Clients of EdgeTrade include hedge funds, mutual funds, asset management firms and broker-dealers in North America, Europe and the Far East.
"Dark algorithms provide the buy-side trader with a key advantage by offering rapid exposure to a wealth of hidden liquidity through the use of sophisticated, intelligent technology," notes Adam Sussman, senior analyst, Tabb Group. "However, the buy side needs more information about where orders are routed, why they are routed there and exactly how much of its order flow is being executed in the dark," he continues.