Rosenblatt had previously used the NYFIX FIXTrader, a trader workstation for equity order management, and Sonic Financial Technologies (now owned byBNY ConvergEx Group) for smart-order routing. “But they were two separate systems,” according to Joe Gawronski, president and COO at Rosenblatt Securities. Because Lava’s smart-routing functionality is integrated into the Lava OMS, “Now it’s two functions and one system,” says Gawronski.

“I think Lava’s smart-order routing is top notch. I’ve been particularly impressed with the way that Lava is dealing with Reg NMS,” says Gawronski.

Though the NYFIX systems did integrate with Sonic to some extent, he says, “Lava has a lot more functionality in terms of the order and execution management,” he adds, citing for instance that real-time market data is integrated into Lava, which is not the case with NYFIX. Also, there is talk that NYFIX plans to phase out FIXTrader, according to sources. Though it's a reliable product, it has remained static, says one source.

When the New York Stock Exchange (NYSE)allows floor brokers to access better prices at away markets, Rosenblatt expects that Lava will play a crucial role in its floor strategy as well as on its upstairs desk.

Prior to Reg NMS taking effect on March 5, if floor brokers saw there was a better away market on the specialist post, they could ask the specialist to access it for them through the Intermarket Trading System (ITS). But by the time the specialist used ITS to access the other market, it was usually too late.

Now, under Reg NMS, floor brokers can use the NYSE’s routing to access better away prices. But Gawronski would rather use a proprietary smart-order router than rely on an exchange for that functionality.

“The exchanges are just really starting to get into the business of routing away. They haven't spent years like Lava has developing the ability to poke and probe and find the fastest and best place to get liquidity,” says Gawronski. [In fact, many of the major exchanges have engaged Lava as well as a compettor OES (Order Execution Services) to provide at least basic routing functionality, he notes.]

Another reason is that the exchange doesn’t always share the broker’s perspecitve in its routing decisions. Also, the vendors allow for customization. For instance, suppose that BATS Trading was to run its January sale again, and NYSE Arca was tied for the best price. It’s possible that the NYSE would route to Arca, its subsidiary, but Gawronski might prefer to route to BATS if its fees were cheaper.

According to the TABB release, “Competitively, as liquidity becomes less transparent, each broker’s smart-order router grows in importance.”

In addition, Rosenblatt will consider using Lava’s Dark Book, which keeps track of the liquidity of all of its users and seeks to give price improvement. “We like to access crossing networks and dark pools so long as we deem them safe from information leakage and gaming,” says Gawronski, but he hasn’t vetted it yet.

The institutional broker will also join Lava’s Sponsored Broker Program, allowing it to sublicense Lava’s technology as a direct-market access offering to its buy-side clients. “If we have a client that wants a DMA offering, we can rent out Lava’s front-end and smart-order routing,” explains Gawronski, noting, "This adds another good option to the list of DMA vendors with whom we work already." This is similar to other DMA products such as FutureTrade and Neovest, where the broker pays a per-share fee to sponsor the DMA access for the client.

Though Reg NMS was a factor in the firm adopting Lava’s OMS and smart router, it was not the sole driver of the decision. “Certainly when we were looking at various systems, functionality that was not only compliant with Reg NMS but suitable for it was one of the drivers of the decision,” says Gawronski.