Agency broker ITG plans to use its own version of the national best bid and offer (NBBO) system and apply it a part of its new fixed income dark pool.
The new service, POSIT FI, will comprise a dark liquidity pool for USD corporate bonds and is due to launch at the end of this year.
Frank DiMarco, director of fixed income electronic brokerage at ITG, said: “Given the current state of FI market and concerns around liquidity in certain cash bond securities, clients have asked ITG to consider entering the FI space.”
ITG hopes to use the existing capabilities of its POSIT dark pool for equities and integration with buy-side blotters to help clients more effectively source liquidity for their corporate bond trades.
However, rather than adopting the usual request-for-quote system commonly seen on corporate bond platforms, ITG has developed a pricing engine called POSIT Bid & Offer, which will use transaction pricing and quote data from a variety of sources, pricing 14,000 corporate bonds every minute, to emulate the role the NBBO serves in dark trading of equities.
Users of POSIT FI will be able to trade at the POSIT Bid & Offer midpoint as well as enter into negotiated trades.
Larger orders with a national of US$1 million or greater will be able to cross via either scheduled matches, which build liquidity at specific times of day to cross blocks, and continuous crosses, which enable anonymous bilateral negotiation.
“Clients will benefit from reduced savings of bid/ask spread, lower transactions fees, no information leakage and the ability to work large blocks at their levels throughout the course of a day,” added DiMarco.
The dark pool is set to launch in Q4 2014 and will be available via ITG’s existing order management systems (OMS), FIX connection and some third-party OMS.
ITG is the latest firm to offer dark trading in fixed income in response to declining liquidity, which has made it difficult for market participants to trade an already illiquid asset. TMC Bonds and Bondcube are also offering dark trading opportunities for corporate bonds, while Liquidnet, which offers a dark trading network for equities focused on institutional investors, bought bond trading platform Vega-Chi in March this year.