The Tradetech Daily

Bank of America Merrill Lynch

Bank of America Merrill Lynch


Markets covered

Bank of America Merrill Lynch’s (BofAML)
internal crossing engine is called MLXN and operates in Australia, Hong Kong
and Japan. BofAML is working with other liquidity providers and across markets
to expand its presence.

Order protection

BofAML’s dark pool is designed to be
completely anonymous. All of BofAML Asia’s algos have used a fair value signal
for over five years to avoid following or creating price spikes in lit markets,
whilst similar logic is applied to dark pool slices. In addition, the firm does
not cross outside the spread or create new highs or lows (unless allowed and specifically
requested by the client).


Clients participate in the dark pool via
algos and DMA dualposting. Clients may also apply to act as direct market makers
but must follow certain rules to ensure that all fills continue to be in agency
clients’ overall benefit.


Order types and matching logic

DMA flow uses a dual-post mechanism which sends the full quantity to the
lit market and in parallel to the dark pool, filling in the dark pool where
some benefit can be found. BofAML’s algos use a number of mechanisms but by
default only look for crosses that naturally fit in with their normal lit
market schedule, whilst improving price. However clients can opt to be more
aggressive in searching for liquidity. The firm’s BLOCKSEEKER algo looks for
dark pool liquidity without slicing anything to a lit market


BofAML is gradually increasing its usage of
ASX Centre Point, all other crossing liquidity
is sourced internally. In Japan, MLXN has a crossing rate around 20% on average. The
recent few weeks show around US$140m crossing per day regionally in MLXN. This
does not include additional volumes sent to external ATS/ PTS venues.