Block trading venue Pipeline Financial has completed a deal to buy the assets of US block trading options firm 3D Markets, to foster institutional block crossing for US options trades.
The acquisition includes the purchase of 3D’s Archangel Blind-Bid Cross execution system, which attempts to eliminate market impact by matching liquidity providers with institutional investors through an anonymous automated technology.
“When you try to arrange a large options trade you need to interact with market makers or liquidity providers which exposes an order to market ?impact,” said Fred Federspiel, president, Pipeline. “With Archangel, traders strip out the information that identifies the ?stock and can then trade based on just the volatility of that ?stock.”
The second offering Pipeline will take advantage of is the creation of a gamma weighted average price (GWAP) benchmark for options trades, a proprietary 3D Markets technology that was negotiated with the CBOE.
“There is not enough liquidity in options at the moment to create a useful VWAP benchmark as used now in the US equity markets,” added ?Federspiel. “The creation of the GWAP benchmark will allow ?institutional traders to benefit from the additional liquidity that’s created when a fair reference price is available.”??
As part of the transaction, the employees of 3D Markets have joined Pipeline.