EdgeTrade has released its Covert algorithm for dark pool order execution. Building on its FAN smart order execution tool that sprays public markets and dark pools simultaneously, EdgeTrade has now developed a separate dark only liquidity-seeking algorithm."What we learned from FAN was that users were executing a very high percentage of trades in dark pools," says Joseph Wald, CEO of EdgeTrade. "Going into it we expected execution numbers to be in line with industry averages of 7 to 10 percent but our users were seeing match rates of up to 28.9 percent. That opened our eyes to how much electronic liquidity is available in the dark pools."
As an extension of FAN, Covert continuously moves a traders' order in line with liquidity in dark pools until best execution is achieved. "Based on our independent agency nature Covert doesn't put preference or bias on any particular pool, it allows the trader to maximize all actionable liquidity that is out there," adds Wald.
He explains that EdgeTrade has spent the last two years researching, reaching out to and connecting to create a network that includes the vast majority of dark pools of liquidity available today.
"Over the last few months we've been adding one or two every couple of weeks," says Wald. "With our un-conflicted model we can connect to all of them. Our goal is if there's a pool of liquidity that is relevant and has an execution that clients want, we'll make it part of Covert and part of FAN."
Ultimately Covert will help traders leverage dark pool anonymity and opportunity without having to connect to separate pools themselves. "Traders don't have to bother with the vetting, connecting and management of all the networking and other details to trade in a dark pool, they can rely on us to do it for them." Wald says.
EdgeTrade's algorithms are available through its own Execution Management System platform for single stock and basket equity orders, as well as many buy and sell side trading and order management systems such as Bloomberg, Charles River, ESP, Eze Castle, Fidessa, Longview, Macgregor, Mixit, Moxy, Neovest, NYFIX, thinkorswim and Tradeware.