Buy-Side Firms Dive into BPool01.07.2014
Block trading equities is steadily growing in popularity again after a drop-off in 2008. As market dynamics begin to stabilize, block trading is a more efficient way to trade. According to a recent Tabb Group report, block trading volume currently represents about 17 percent of total daily equity traded volume in the U.S., up from 14 percent in 2008.
A study conducted by Bloomberg earlier this year found that nearly seven in 10 institutional traders would prefer to trade in blocks if they could find the right venue. More than two-thirds of regular block traders use a service specifically designed for trading blocks, the same survey revealed.
Bloomberg created BPool with BIDS Trading to empower buy-side traders by giving them more control over the execution of equity block orders of 10,000 shares or more. Since its launch in September 2012, BPool has been adopted by more than 150 buy-side firms, attained approximately five percent of the equity block trading market in the U.S. and achieved an average block fill size of more than 40,000 shares.
“Existing block trading system workflows are inefficient and can lead to missed opportunities and suboptimal commission management,” said Benoit Girard, a portfolio manager at Stanton Asset Management of Montreal. “U.S. equities markets are highly fragmented and liquidity, especially for block orders, is very hard to find. BPool provides access to reliable liquidity in the names and order sizes that I’m looking to trade.”
BPool is an opt-in service that enables Bloomberg and BIDS Trading’s ATS clients to access liquidity from Bloomberg’s many equities trading platforms, including AIM, EMSX, and SSEOMS as well as BIDS ATS. BPool uses the sponsored-broker model created by BIDS Trading, which gives traders the flexibility to pay commission dollars to the broker of their choice.
“BPool empowers traders by giving them access to unique, high-quality liquidity and greater control over their trade,” said Jim White, global head of operations for BPool. “Institutional investors have expressed concern that market fragmentation, and lower trading volumes make it more challenging to route large orders and fulfil research or other commission commitments. BPool addresses those concerns.”
“I sometimes get matches in BPool without matching in any other crossing venue, meaning it is truly unique liquidity that I would not have gotten if I did not have BPool access,” said Dennis Fox, the director of equity trading at Munder Capital Management, a Michigan-based asset manager with nearly 20 years’ experience trading U.S. equities. “It is a user friendly application where I can react to matches when they are presented to me. When I get executions, I am able to credit research brokers on each trade.”
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