Bank of America Merrill Lynch
All of BAML's algorithms source liquidity from internal and external dark venues in addition to lit trading venues. The firm also offers a dark-only algorithm, BlockSeeker, which executes on BAML's MLXN crossing network and external dark venues.
Access
BAML’s algorithms can access BATS Europe’s dark book, Chi-Delta, MLXN, ITG POSIT, SmartPool, Turquoise’s TQ Lens and Xetra MidPoint.
The company’s smart order router (SOR) accesses all connected venues on a best execution basis unless otherwise requested.
All BAML’s algorithms access dark liquidity using the firm’s SOR. The router provides clients with controls such as the ability to enter the minimum/maximum cross quantity and limit price for crossing. The algorithms are available through various vendor front-ends.
Liquidity interaction
The method used by BAML’s SOR to access dark liquidity varies from algo to algo and is usually based on order size and expected probability of fill. For example, the bank estimates the hidden liquidity in dark pools or iceberg orders. The algorithms also send out immediate-or-cancel order instructions to dark venues before interacting with the lit market.
The SOR dynamically posts between venues depending on a number of criteria, such as real-time and historical statistics, to determine where to post and how to divide the order between venues. This includes intelligently splitting between dark and lit venues.
Anti-gaming logic
BAML has implemented a variety of anti-gaming rules which are reviewed on a regular basis. The logic is a combination of volatilitybased limits, minimum quantity parameters and ping detection. The bank offers an automated minimum cross size based on an individual stock’s trading characteristics.
Customisation
All BAML’s algorithms are customisable to clients’ demands. For example, clients have the ability to increase default dark participation or opt out of dark liquidity.
Service and reporting
Clients can find out which venue they executed on and whether the execution was lit or dark as soon as they get a fill back using FIX. In addition to the real-time fill messages, the firm’s execution consultancy group offers a detailed report on trading performance and where its SOR executed.
Future development
BAML has recently launched its latest algorithm, Ambush, in Europe, which only takes liquidity from lit and dark venues and does not post. The bank is working on a number of projects, including additional execution consultancy, new algo development and post-trade analysis, which will be rolled out in the near future