The Royal Bank of Scotland's Global Banking & Markets Group is to launch RBS Cross, a European broker crossing network (BCN) in Q1 2011.
RBS Cross, which has been developed in-house, is currently being used for crossing proprietary flow across the bank's trading floor. When rolled out to clients it will offer crossing at the mid-point of a European best-bid-offer price. Most other BCNs, such as those offered by Credit Suisse and Citi, offer crossing at any price within the spread.
Assad Amin, global head of equities execution for RBS Global Banking & Markets Group, says that other algorithms will be introduced at a later point, for example VWAP will be available over certain periods. Long-only buy-side and retail clients are expected to make up the majority of order flow.
Amin says that the offering has been developed in response to the changing technological needs of clients. “The algorithmic toolset is fairly commoditised. The differentiator is liquidity and how clients can access liquidity, with the end goal being minimal impact in trying to transact their business,” he explains.
The launch comes at a time when the European Commission, via its consultation on MiFID issued on 8 December, is asking market participants about the role and status of BCNs, specifically whether they should be reclassified as systematic internalisers or multilateral trading facilities depending on their use of proprietary trading flow, and trading volume.
Amin says that the bank has taken this into account. “We’ve done this in a fairly flexible way,” he says. “As regulation changes we will be able to adapt to the regulatory environment.” He adds that the flow of liquidity will be fully customisable so that if clients want to interact with institutional long-only flow, or with client only, or proprietary flow they will be able to. They can also exclude more short-term flow, and monitoring and anti-gaming technology will be in place. “We will provide clients with information on who they interacted with,” Amin adds.
The BCN is also expected to launch in Asia in 2011, once regulatory approvals have been granted.