US broker ConvergEx has launched a new order routing strategy to specifically target orders at new alternative trading system (ATS) IEX.
The IEX venue, which was the subject of Michael Lewis’ recent high frequency trading (HFT) exposé ‘Flash Boys’ and launched last year, offers dark trading but with a deliberate delay on orders reaching the matching engine, in order to discourage the use of latency arbitrage strategies.
ConvergEx researched the venue and found that IEX was successful in protecting its clients’ orders from HFT strategies.
The routing strategy enables clients to designate a percentage of their order to be sent to IEX, while the remainder will be executed by the broker’s Darkest algorithm, which searches for liquidity across 20 other dark venues.
The Darkest + IEX strategy enables clients to allocate either 25% or 50% of their order to IEX. If either part of the order is filled, it will then reallocate the order depending on the chosen portion to be sent to IEX.
Oliver Sung, head of US electronic execution at ConvergEx, said: “ConvergEx began routing orders to IEX in November of last year and we decided to expand our relationship after our analysis confirmed that our clients were receiving excellent execution quality in their venue.
“With the addition of Darkest + IEX to our suite of trading strategies, we are able to provide clients with even greater control over their orders.”
IEX has rapidly risen up the ranks of US dark pools, going from being relatively unknown at the beginning of this year to consistently feature in the top 10 US ATSs.
The most recent figures from Tethys Technologies, which produces a regular analysis of US dark pool volumes, placed IEX in seventh nationally for number of shares traded for the weekend ending 25 August. It traded 139.9 million shares during that week, representing a 5.67% market share. The same analysis ranked IEX eighth in terms of average trade size, at 264 shares per trade.