Block trading venue operator Pipeline has reported an increase of its average trade size in the US and has said it hopes to be fully operational in Europe by the start of 2011.
A new daily average record of 93,297 shares per trade was recorded in the US on 9 September, beating the previous record of 86,786 shares set on 25 June. According to Pipeline, the average dollar value per trade of the new 9 September record was just over US$1.98 million and occurred on a day when Pipeline accounted for over 10% of total daily volume in 15 different stocks.
Pipeline's new record comes despite a perceived trend away from block-focused trading venues in the US. Some market observers have noted that block trades has become more difficult to execute, particularly in lit markets, due to the growing segment of US equity trading volumes accounted for by high-frequency strategies and the tendency for long-only institutions to use algos to break up large institutional orders.
According to Marcus Hooper, executive director, Pipeline Europe, the rise in average trade size is a result of increasing customer confidence in the trading venue's technology. “We have spent many years developing the anti-gaming technology for our system and have found that once customers become comfortable with using Pipeline, they increase the size of order they are willing to place in the system,” Hooper told theTRADEnews.com.
Hooper also revealed that Pipeline is planning to ramp up its capabilities in Europe by the start of 2011. In Europe, Pipeline has already launched its Algorithmic Switching Engine, which uses predictive technology to select from a range of third-party execution algorithms to minimise market impact while trading.
Currently, European clients can only rest orders in Pipeline's Block Board with the aim of finding the other side to a trade. Upon full launch at the start of next year, the Block Board will also offer an indication of interest-type service, which acts as an initial indicator of block liquidity between the platform's members.
“We have held back the full capabilities of the Block Board until we are confident that we will have a large number of members ready to trade on launch,” said Hooper. “This functionality is the basis for the vast majority of block executions for Pipeline in the US.”
The venue presently has around 50 members ready to trade and Hooper expects 125 to be connected by the end of year.
“We are now looking to sign up more sell-side members that may use the Block Board to trade their principal or risk-based flow via Pipeline after primarily targeting buy-side firms to use the Algorithmic Switching Engine,” added Hooper.