Clearpool Navigates Market Microstructure01.09.2015
As equity markets continue the evolution from their floor-based roots to high-speed, computerized trading, both the buy side and the sell side require new execution tools capable of navigating the complex web of lit exchanges, dark pools, and complex order types.
New York-based Clearpool Group, a trading software and execution company founded in 2012, has introduced a trading platform called Iris that it says is designed to transform how orders are handled electronically to improve liquidity interaction and fill rates.
“In a post-Reg NMS environment we have had a lot of flux, and then things have stabilized at this point, and a lot of what’s out there has become fairly ‘commoditized’, fairly structured in terms of the way that the Bulge Bracket and a lot of other firms utilize their technology and their execution protocols,” said Joe Wald, chief executive officer of Clearpool. “Over the last year or so there’s been quite a bit of outcry, predominantly from the investment community, about where do we take the market from here and how do we improve from where we are.”
Iris aggregates orders to elevate their prioritization in a venue’s execution queue, giving clients trading through Clearpool Execution Services, an independent agency broker-dealer, the opportunity to derive a better quality print, the company said in a release.
“The founding vision of the company is to create innovative trading technologies and software as well as to deliver those services within an unconflicted agency only broker dealer that really has the opportunity to differentiate itself,” said Wald.
Clients trading through Clearpool Execution Services will automatically have their order placement guided by Iris to improve handling in both price/time and price/size venues, with cancel/replace orders and in sourcing block liquidity in dark venues.
The system is designed to improve trades that are executed algorithmically by decoupling child orders routed to a venue from the parent. When a customer cancels an order, Iris will in turn cancel or reduce the order with the lowest queue priority. This automatic response effectively enhances the queue priority of all other Iris orders.
In essence, the system performs a deep dive into the micro-structure of each of individual pools of liquidity, down to the execution protocol level, such as whether it’s a price-size venue or a price-time venue, how the venue performs cancel/replaces, what order types are available, etc.
“Iris aggregates order flow within these different venues, giving people the opportunity to have a higher queue priority, or be able to interact with liquidity that they would not be able to interact with under the current execution protocol that brokers are using today,” Wald said. “This takes a different approach into order handling and execution quality.”
Added Ray Ross, executive vice president and chief technology officer at Clearpool: “We’re very focused on working with the market structure as it exists today and helping our clients to take advantage of that structure. As market structure evolves, our technology will evolve along with it.”
Wald, who was appointed CEO of Clearpool Group in May 2014, previously worked at GAIN Capital, where he ran GTX, the firm’s institutional electronic FX trading business. Earlier, Wald was a managing director and head of Knight Direct, Knight Capital Group’s institutional electronic trade execution business. Tom Joyce, former chairman and CEO of Knight, is on Clearpool’s advisory board and is a private investor in the firm.
“We’re a number of industry veterans here that have had our careers spent building electronic trading tools and systems and businesses,” Wald said. “Both myself the other members of the team really do understand this market structure, not only as it is today, but where it came from and how it’s evolved to this point. We are on the front line of working with industry participants, market participants as well as the regulatory agencies to look at how the market will continue to evolve.”
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