Société Générale Corporate and Investment Banking has launched AlphaY, a new broker crossing network (BCN) that will prioritise client orders and offer execution at three price points.
The new dark pool will be the second to go-live in the space of a week, following the launch of agency broker CA Cheuvreux’s multilateral trading facility (MTF) BLINK MTF last Monday, emphasising the demand for new and innovative non-displayed trading functionality.
In addition to client orders, AlphaY will include flow from SocGen’s single stock sales trading desk, incorporating a wider range of liquidity than AlphaX, the firm’s existing internal dark pool that only includes trades originating from algorithms. The firm currently executes an average of €110 million per day in in AlphaX.
Execution of client orders will be prioritised over internal orders in AlphaY and members can choose to cross at the bid, mid or offer. Trade prices will be based on a consolidated best bid and offer compiled from an amalgamation of stock prices from the primary market and MTFs BATS Chi-X Europe, Turquoise and Nordic-focused Burgundy.
According to Richard Hills, global head of quantitative electronic services, SocGen, the launch of AlphaY as a BCN will help the French bank maintain closer control of the liquidity in the venue. Unlike MTFs, BCN operators can decide who accesses their pool and how orders are matched.
“We didn’t think that running AlphaY as an MTF would allow us sufficient flexibility to police the flow,” Hills told theTRADEnews.com. “We don’t think pricing is sufficient to control participation. Being a BCN also allows us to remove participants from the pool if we don’t like their trading behaviour, which would not be possible if AlphaY was an MTF.”
Hills added while SocGen offers DMA, it does not offer co-location or other services geared towards high-frequency trading strategies, meaning these types of participants would not be present in AlphaY.
AlphaY will offer trading in 4,500 European names and will be underpinned by a platform developed by NYSE Technologies, the commercial technology unit of transatlantic exchange NYSE Euronext that also supplies the trading engine for Goldman Sachs’ Sigma X MTF.
Hills said one of the main benefits of using NYSE Technologies was the firm’s ability to help SocGen better react to any further regulatory changes in MiFID II, such as the outlawing of BCN, or at the very least a recalibration of the venue category. If AlphaY were required to become an MTF under MiFID II for example, the vendor would be able to update the platform using existing, compliant technology.
“If the BCN construct is not allowed, our relationship with NYSE Technologies will allow us to provide access to the pool directly via their SFTI network and incorporate the required surveillance for an MTF,” said Hills.