Newedge Group, a multi-asset brokerage, has extended its US smart order router for equities and equity options to external market participants, which it says will be particularly useful for small- and mid-sized firms with constrained resources.
The smart order routing platform, which has been available for Newedge clearing clients since Q3 last year, takes a dynamic approach to finding liquidity based on historical market activity.
“We constantly monitor and adjust the logic of our routing platform,” Jack Boyle, senior director, financial futures and options and equities execution at Newedge, told theTRADEnews.com. “The first priority is to ensure trades are never executed outside of the national best bid and offer, but we also consider historical price improvement on different venues, depth of liquidity and exchange latency among other factors.”
The logic is also supported by the recently-formed Newedge Best Execution Committee, which examines daily reports that monitor routing results to ensure client needs are being met.
By allowing clients to access both equity options and equities via a single connection, Boyle added the router may be attractive to smaller brokerage houses.
“We think our router will be of most use to brokers that may not have the budgets or manpower to build and operate their own routing platforms, as well as market makers and high-frequency trading firms,” said Boyle.
The Newedge router is connected to all major US equity exchange and options markets, including International Securities Exchange, Chicago Board Options Exchange, NYSE Amex/NYSE Arca and the Boston Options Exchange.
The router can be accessed via a variety of front-end systems and supports all exchange order types, including those used for multi-leg options trades.
According to Newedge, its router has averaged over two million cash equity shares and approximately 25,000 equity option contracts per day since its internal launch in Q3 2011.
IRS clearing service
The broker has also announced plans to develop its clearing capabilities for interest rate swaps (IRSs), which will be supported by Newedge’s co-owners Credit Agricole and Société Générale from Q2, with both serving as IRS contingent default managers. Customers of Credit Agricole and SocGen will also be granted access to the new service.
Newedge said it would be the first futures commission merchant to deliver the benefits of central clearing to the buy-side and liquidity providers. Interest rate swaps are the largest class of OTC derivative that are likely to be covered by new rules – such as the Dodd-Frank Act in the US and the European Market Infrastructure Regulation – that bring swaps on exchange, where possible, so they can be centrally cleared.
“Newedge is committed to extending our established listed derivatives clearing services to additional OTC asset classes, beginning with IRS”, said Newedge CEO Nicolas Breteau. “To fulfill this strategic objective, we are enhancing our multi-asset infrastructure, leveraging the support of our A+ rated shareholders and, working closely with regulators and CCPs.”