The Tradetech Daily

Bank of America Merrill Lynch Instinct X

Bank of America Merrill Lynch Instinct X

Natan TiefenbrunEmail: natan.tiefenbrun@baml.comTel: +44 207 996 8531

Bank of America Merrill Lynch’s (BAML) Instinct X offers a deep and diverse pool of non-displayed liquidity provided by BAML’s cash and portfolio franchise, institutional, hedge-fund, and broker dealer client order-flows, derivative unwinds and (segregated) internal/external market makers.

In Europe, over 1,000 clients have the option to participate in the pool, with 300+ active daily. Realised crossing rates are 40% on average, and average daily turnover in September and October 2013 was greater than €500 million.

Functionality and order types

Instinct X offers trajectory crossing which matches
algorithm scheduled flow at target VWAP/auction prices, and prevailing-BBO
order book, which features day and immediate or cancel orders, absolute and
pegged limit instructions.

A tiered matching model gives priority to natural agency
flow and price improvement is shared between counterparties.

Access and participation

Trajectory and order book crossing is accessed
through BAML Algorithmic Execution Strategies and its cash and portfolio
franchise. Order book crossing is also accessed through BAML’s smart order

Instruments traded

Instinct X offers trading in cash settled equities
and contracts for difference and exchange-traded funds.

Order protection

To protect orders, BAML implements rigorous
proactive monitoring of all clients’ behaviour, and makes frequent adjustments
to customers’ configurations to optimise execution outcomes. Additionally,
execution strategies employ stock specific minimum order sizes, while a fair
value signal ensures that crosses occur within expected price bands.
Anti-gaming measures can be customised as required.

Future developments

Instinct Natural has been introduced in the US
allowing clients to send conditional orders to Instinct X. New functionality
will provide opportunity to search for institutional & private clients
blocks whilst working orders if liquidity is not available. These options are
to be explored for the European and Asian markets.