UNX Inc., an institutional brokerage firm, is introducing a suite of 14 algorithmic trading strategies, new order types and expanded connectivity to regional exchanges for listed stocks.
UNX is offering the new functionality, including connectivity to three regional exchanges -- the Chicago Stock Exchange, the National Stock Exchange and the Philadelphia Stock Exchange -- to help buy-side customers cope with fragmented markets. "We were getting a number of requests for more robust listed functionality so the ability to sweep these venues using our proprietary algorithms, plus connectivity to all the regionals, helped us round that suite (of algorithms) out," says Jeff Brown, director of product development. The timing is in line with a market structure debate around listed trading and changes going on in the New York Stock Exchange and regional exchanges, including the Chicago Stock Exchange, that are contemplating automatic execution capabilities. UNX competes with the likes of Instinet, ITG and REDIBook from Goldman Sachs.
"As Boston rolled out the ILA [Instant Liquidity Access] product and NYSE has (filed to) revamp its Direct+ offering, there's increasing interest from our clients for those auto-ex capabilities," says Brown.
In addition to adding connectivity to regional exchanges, UNX is expanding support for sophisticated order types such as pegging and discretion for orders submitted to slower, manual exchanges, including the American, Boston and NYSE exchanges. "That's an advantage of our infrastructure," says Brown. The challenge, Brown says, is in managing the complexity of automated systems and slower, manual exchanges.
One new order type called MetaPost allows a trader to simultaneously post an order to multiple execution venues while the order is treated as a single order within UNX's infrastructure. If the stock is Microsoft and the trader sees liquidity in Archipelago Exchange, INET, SuperMontage and Brut, instead of managing three or four orders for Microsoft through single platforms dedicated to each destination, a MetaPost order will immediately divide the number of shares and send it across all destinations simultaneously. If the trader decides to cancel the order or change the price or quantity, that trader makes the change once and UNX manages all the underlying sub-orders for the trade, says Brown.
Another new feature is stealth order functionality, which allows a trader to conceal an order within the UNX tactics engine until liquidity becomes available within the trade discretion parameters, the firm plans to announce next week. For a more aggressive style of trading, it will roll out a suite of four Probe sweeps, designed to discover liquidity between the spread and subsequent price levels, including penny, sub-penny or mid-point increments. For example, if a stock is bid at 20 and offered at 20.04, and a buy order comes in, the algorithm will sweep all the venues at 20.02 to discover hidden and discretionary liquidity. "It's a way to look for price improvement," says Brown.
UNX will roll out the new functionality to a select number of clients initially and then it will be released to its general client base of buy-side customers including hedge funds, banks and asset managers.