Credit Suisse registered CrossFinder, its internal crossing network, as an alternative trading system (ATS) two weeks ago with the Securities and Exchange Commission (SEC), but not for the reasons that were initially reported. Last week, the press reported that Credit Suisse was turning the internal crossing network into a public block-crossing system that would compete with the likes of Liquidnet. The news articles in the Wall Street Letter and Finextra.com cited this as the main reason for registering the ATS.
According to Dan Mathisson, head of advanced execution services (AES) at Credit Suisse, CrossFinder lines up all the little pieces -- the 300- and 400-share size orders resulting from AES' different algorithmic trading tactics, and then crosses them between the spread. "It never will print 50,000 share trades" says Mathisson, dispelling the notion that CrossFinder is attempting to transform itself into a public block-crossing network. "What's different about CrossFinder is it's not really about putting up big blocks. It's about lining up little pieces within AES flows," he explains.
According to Mathisson, Credit Suisse registered the internal crossing engine as an ATS with the SEC to improve transparency and to bring in SEC oversight. Since AES is doing high volume -- in January it averaged over 150 million shares a day with peak days of 200 million -- while CrossFinder is averaging 30 million shares a day, "We thought it was important to put this thing out in the open and make it transparent and have the SEC to oversee it. It makes it more attractive to our clients," he explains. "We thought registering as an ATS would be a good move for the business." One of the selling points is that AES flows are kept separate from the bank's other flows, he explains. "The more transparent we are about how the crossing systems work, the better we think [it is] for our business," he adds.
Mathisson says the brokerage firm does not have plans to open up the ATS to outside institutions. "It's not a precursor to turning it into an ECN." According to Mathisson, an ATS is a trading system that is under SEC oversight, whereas an ECN displays quotes.
In addition, Mathisson conveyed that earning market data fees was not a motivation for registering as an ATS. "You have to be a market center to earn market data fees," such as Archipelago, the New York Stock Exchange or NASDAQ. "As far as I know, there's no market-data implications," 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