Buy-side traders who use instant messaging to communicate with and route order flow to the sell-side community now can use IM to sweep crossing networks and dark pools. In February, IMTrader, the instant messaging network for brokers and fund managers, began allowing institutions to sweep electronic pools for hidden and visible liquidity by integrating its network with UNX's algorithmic technology.
"We've helped integrate their algorithmic system out over the IMTrader network to help investment professionals have the ability to communicate orders to a sophisticated platform using an AOL Instant Messenger window," relates Ed McDonnell, SVP of sales for Pivot Solutions, the company behind IMTrader. The IM network converts the IM into the FIX protocol and feeds the information directly into a broker's order-management system (OMS), he explains, adding that there's no new technology involved and no change in current workflow for the buy-side trader.
With this capability, IM may just be the next liquidity hub. IMTrader boasts 2,000 total users, including more than 350 buy-side firms that use the IM network to communicate equity flow, which amounts to approximately 100 million shares a day moving through its network, according to McDonnell. "You'd be amazed how many buy-side traders use instant messaging to communicate orders," he says.
UNX is offering access to two order-type tools: IOC Sweep and Penny Probe. The IOC (Immediate or Cancel) Sweep tool algorithmically sweeps electronic markets at a user-defined limit price, extracting available liquidity, according to a release announcing the deal. Penny Probe extracts liquidity by algorithmically sweeping within the bid-ask spread at ascending or descending one-penny increments, the release said.
"If we build a new order type or new special algorithm for [IMTrader], everyone who has the IM immediately gets it," says Scott Harrison, CEO and president of UNX, a Burbank, Calif.-based agency brokerage specializing in direct-market-access and algorithmic technology.
But with the buy side transmitting orders via IM and now using the medium to access algorithms and sweep liquidity pools, compliance questions arise. According to Pivot's McDonnell, however, because IMTrader feeds orders directly into the brokers' OMSs using FIX, there is no regulatory issue.
"I'm coming in with the protocol that financial services recognizes as the standard," McDonnell says, explaining that broker-dealers have several methods to keep audit trails of communications over IM, including archive and review systems such as Facetime, IM Logic and Akonix. And Pivot has an interface into all three of those products, McDonnell notes. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio