Agency broker Bloomberg Tradebook has launched two new algorithms in Europe – Smart Order Algorithmic Routing (SOAR) and Lock-Cross Eliminator – which aim to help clients find and aggregate liquidity in the region’s increasingly fragmented equity markets.
Both new algorithms will be available to both buy- and sell side institutions.
SOAR combines smart order routing and execution algorithm functionality to allow users to route orders to venues based on either price or available liquidity, while automatically searching for hidden liquidity, either via dark pools or iceberg orders on-exchange.
The algorithm offers two trading styles: Liquidity Sweep is designed to remove all liquidity within a user’s limit price at virtually the same time; Price Sweep removes liquidity one price-level at a time up to the user’s limit price.
“Most liquidity-seeking algorithms only go after displayed liquidity and only at the limit price. They do not necessarily seek hidden liquidity, seek it with smart logic or offer a price sweep with the ability to get price improvement,” Jim White, head of global equity electronic trading product development at Bloomberg Tradebook, told theTRADEnews.com.
SOAR also provides a series of tools to give users a consolidated picture of the market. These include a view of full market depth that allows clients to see the available liquidity in a stock wherever it is trading, a ‘heat-map’ which indicates where a particular stock is most actively traded, and a consolidated tape, which reports executions across multiple venues. The algorithm also provides an audit trail, showing users how it has executed orders.
“A lot of other smart order routers are ‘black box’,” said White. “You just give someone an order to buy 100,000 shares of Vodafone at a particular price, but you don’t really have a choice of how it executes, you are not seeing or monitoring how it executes and you are not managing the order. With SOAR, you can manage all of those things.”
White said more features will be added to SOAR over the next two months.
Tradebook’s Lock-Cross Eliminator is designed to tackle the fact that European trading venues have no obligation under MiFID to respect one another’s quotes or onward-route if there is a better price on another exchange. Passive orders on European venues are therefore prone to locking, where the bid and ask are the same, or crossing, where there is a negative bid-ask spread. The algorithm essentially transforms part of passive order into an aggressive one to respond to the liquidity that is locking or crossing it.