ALGO UPDATE: Hidden Orders Now Actionable Via WEX’s Sweep and Spread


Come out, come out wherever you are.

Liquidity, that is.

In a move designed to help buy side traders find liquidity for their single- and multi-leg options orders, Wolverine Execution Services (WEX) has modified its Sweep X and Sweep Spread algorithms to now consider hidden orders and probe for liquidity on options exchanges. This new functionality is designed to help a trader’s orders to stay hidden and maintain anonymity when sourcing either blocks or smaller size trades.

A hidden order (or iceberg) is an order type where the broker is required to display only a small part of the order. They are commonly used to protect an investor from adverse price selection when he has a block order to execute. Several exchanges, both in options and equities, allow the use of hidden orders.

“At WEX, we are constantly improving our algorithms to meet the evolving needs of our clients,” said Troy Googins, head of WEX product and business development, referring to Sweep x and Sweep Spread. “It’s still critical to provide efficient ways to manage the remaining portion of an order. By remaining hidden, clients can mask their intentions while the order works within the market.”

Call it a way to trade darkly or akin to placing an order in an options dark pool.

Everything in the options world has to print on an exchange,” Googins told Markets Media. “There are no dark pools. But by using our Sweep-X algo you, the buy-side trader, can stay hidden.”

WEX Sweep-X is designed to meet the need for immediacy in order execution by aggressively seeking liquidity for marketable orders to quickly capture displayed and now hidden liquidity. WEX Sweep Spread works orders using Sweep-X’s proprietary execution logic by simultaneously accessing the various complex order books through direct exchange connectivity. Both algos rely on hyper fast data feeds to provide them with the right intel on hidden orders and market conditions.

“By default, Sweep-X provides proprietary display size logic for both single leg and complex orders,” Googins explained. “However, clients occasionally do not want their orders to be displayed in the market place and would rather have the choice to have their orders remain completely hidden if they are not marketable.” Googins added.

When talking about the genesis of the hidden order functionality, Googins said it came from the buy-side who wanted more flexibility in how much of an order they could show when looking for liquidity. In equities, hidden order types were pushed by the exchanges looking to capture order flow lost to the dark pools.

“This was functionality was asked for by the buyside,” Googins said, “not the exchanges. The buy-side trader wants to stay hidden in the weeds when it comes to taking liquidity out of the market.”

Sweep X and Sweep Spread simply sit dormant and wait for the hidden order to come to it. And then it executes.

Googins expects the algos to increase in popularity as hidden order types are gaining in popularity within the options community and there are no private or dark venues to trade in.

“It’s a market structure thing – with options trading at wider spreads or when a client enters an order in a larger size, traders want to use a sweeping algo to get a fill if it’s out there.”

And that is what the buy-side trader wants – to get his fill and exit the market before he either subjects himself to adverse price selection or he himself becomes the new market bid.

In addition to Sweep-X, WEX also offers WEX Best-X for options, an arrival price algorithm designed to intelligently determine the best execution opportunities for an order and to seek out price improvement while maintaining high order fill rates.

WEX algorithms are currently available via the WEX Trading Platform (WTP), FIX and through other FIX—-compliant EMS or OMS providers.

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