Buy-side traders that feel comfortable using instant messaging to communicate with and route order flow to the sell-side community can now use IM to sweep crossing networks and dark pools.
The cool technology comes as the result of a partnership between Pivot Solutions, the developer of IMTRADER and UNX, an agency brokerage specializing in direct-market access and algorithmic technology.Last week, IM TRADER, 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," explains Ed McDonnell, Pivot Solutions' SVP of Sales. There's no new technology involved and no change in current workflow for the buy-side trader.
In fact, instant messaging may just be the next liquidity hub. IMTRADER touts that it has a total of 2,000 users, connected to the IM network, including over 350 buy-side firms, either or sending trade equity flow, which amounts to approximately 100 million shares a day moving through its network. "You'd be amazed how many buy-side traders use instant messaging to communicate orders," says McDonnell.
UNX is offering access to two order-type tools: IOC Sweep and Penny Probe. The IOC Sweep (which stands for immediate or cancel) algorithmically sweeps electronic markets at a user-defined limit price extracting available liquidity, the release said. Penny Probe extracts liquidity by algorithmically sweeping within the bid-ask spread at ascending or descending one-penny increments, said the release.
"We have this really different algorithmic technology. It's a bridge between DMA and algorithms," says Scott Harrison, CEO and president of UNX, based in Burbank, Calif.
UNX was a client of IMTRADER for about a year, but it was only in the last couple of months that both began working on projects together to add value to their system, says Harrison.
Prior to this strategic partnership, customers would send orders to UNX's program trading desk and its high-touch trading desk. It would run the orders through its algorithmic technology and send it back, explains Harrison.
"This is giving people algorithmic tools, but giving them the control they want, " says Harrison. Because of the component nature of UNX's technology, the agency brokerage is able "to change and tweak" its components."
IMTRADER also represents a new distribution partner for UNX and a shift in strategy. Up until the IMTRADER deal was struck, UNX's liquidity sweepers and order-type logic was available through its real-time trading application, which is a competitor to RediPLUS, says Harrison.
But when the IMTRADER deal came to fruition, UNX was in the middle of unbundling its trading components from its proprietary trading applications and making them available through OMSs and other EMS systems, says Harrison.
"Because of our ability to create tools very dynamically and modify them, it works well in this environment," says Harrison. "If we build a new order type or new special algorithm for (IMTRADER), everyone who has the IM immediately gets it."
But are there compliance concerns? With the buy-side transmitting orders via instant messaging and now using IM to access algorithms and sweep liquidity pools, could this raise any red flags?
According to McDonnell, because IMTRADER converts the instant message into the FIX protocol, which then goes straight into the broker's OMS, there is no problem, he says. "I'm coming in with the protocol that financial services recognizes as the standard. That's how we're communicating that protocol into the broker-dealer's systems," he says. Broker dealers have several methods that they use to keep audit trails of communications over IM, he adds. They utilize archive and review systems such as Facetime, IM Logic and Akonix, and Pivot has an interface into all three of those, he says. 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