PDQ Enterprises, developer of the PDQ Automated Trading System (ATS) is now an execution venue on the REDIPlus platform, operated by REDI Global Technologies, the independent company spun off from Goldman Sachs.
The integration is a milestone for PDQ ATS, an equity-trading venue that attempts to slow down the high-speed market for a fraction of a second by exposing the order to an “electronic algorithmic trading crowd” before running the match.
“In light of their recent separation from Goldman Sachs it’s an opportunity,” said Ed O’ Malley, president in an interview. “REDI is certainly a significant player in that space of providing EMS platforms to a network of people. We felt that it was a significant step for PDQ to partners with REDI in this venture,” said O’ Malley.
[For more on how REDI has evolved over the years, read: Goldman's REDI Spin-Off Signals EMS Market Shift.]
PDQ already connects with more than 15 different platforms today, including Bloomberg, Fidessa, Mixit, LightSpeed and Stirling Trader, so it covers most of the large equity trading platforms, but it was missing REDIPlus, an important platform, since it has access to 97 percent of the world’s equities and derivatives electronic exchanges through registered broker dealers.
The agreement will give PDQ access to order flow from REDIPlus. But it will also provide REDIPlus clients with a service that is different from other dark liquidity pools.
The PDQ ATS auction model consists of access to an “electronic- algorithmic-trading crowd” competing for orders. When an order enters the auction model in a secure facility, it is paused for a full 20-milliseconds and in that time algorithms respond with their most competitive quotes to build a mini book where the responses are prioritized on a price –time basis. At the end of the pause, orders are matches against the newly created book.
Prior to the spin-off of the financial technology company from Goldman, it was “difficult to work on getting the to prioritize,” says O’ Malley. “Now as an independent company with multiple partners, I think they’re looking at expanding. We obviously are part of that process, so we’re excited about that.” Said O’Malley.
While PDQ is still small firm with 12 employees that was started nearly four years ago, it has experienced significant growth in its trading volume, and is now seeing 275 million shares of marketable activity each day flowing through its system. “The growth has been significant. If you look at where we were a year and a half ago, we were half of that,” said O’ Malley.
In addition to matching trades, what has caught on is customized routing. “We work with each client on what they want to do with their orders, such as posting in the dark, scraping in the dark, or mid-point pricing, and how long they want it to work an order. We develop these customized routes for them so no firm will have the same route,” explains O’ Malley. “That flexibility and customization is appealing. We’re able to do it efficiently and quickly, and that’s one of the drivers for the increase in order flow,” he said, adding that PDQ is connected to virtually every trading venue, whether it be an exchange or dark pool.
As a newcomer to the US stock trading market, it took a lot of “blocking and tackling, knocking on doors and explaining who we are.” O’Malley said PDQ is proud of this growth especially given the stagnant overall equity volumes. “More importantly, our overall execution volume is growing,” he said. The firm’s internal matches plus the outbound customer routing adds up to about 35 million shares per day.
PDQ’s model consists of liquidity seekers that utilize platforms like REDIPlus and liquidity market makers – high frequency trading firms responding to order flow presented to them after a brief pause. “That business is growing as well,” says the firm’s president.
“What we are focused on is providing cost efficient access to the market while providing best execution. That has begun to resonate with a lot of players that use us with either the front-end platforms or algorithms or smart order routers to access the market. And the platforms that we do have connected to us, we are beginning to see more penetration.
According to O’Malley, PDQ currently has some clients of REDIPlus who will be accessing PDQ ATS directly for both the internal [matching] process as well as our customized order routing And now that PDQ is connected to REDIPlus, it has the majority of platforms covered. “They were one of the few large platforms that hadn’t connected to us,” says O’Malley.