Fragmentation Runs Across Borders
Trading equities is becoming increasingly complex, with fragmentation and cross-border trading upping the ante for keeping abreast with advanced technology.
Trading system providers are leveraging their expertise to build out systems that are suited for the changing Canadian marketplace.
Fidessa’s Canadian trading platform provides connectivity to all Canadian trading venues, including ATSs and dark pools, and to buy-side and sell-side clients as well as to back-office systems.
“As a global company, we bring our depth of knowledge to the local marketplace,” Martin Hakker, managing director of Fidessa Canada, told Markets Media. “You can’t simply assume that a solution designed for the U.S. will work in Canada. We have our own product management staff to develop solutions specific the Canadian marketplace.”
Fragmentation is occurring both domestically and internationally across the U.S. and Canada.
Fidessa has launched Tradalyzer, a trading analysis tool, in Canada. It provides an unbiased and independent assessment of individual trades and trading strategies across Canadian liquidity venues including stock exchanges, ATSs and dark pools.
Tradalyzer allows users to input the parameter of a trade (such as stock ID, price, direction, start and end time) which is then compared with the consolidated view from Fidessa’s ticker plant, resulting in a report that shows how that traded compared with the performance of the consolidated market during the same interval.
The need for unbiased information on trading performance runs across all segments of the market. “A buy-side firm might use Tradalyzer to view their broker’s performance, a sell-side broker might use it to analyze how well their SOR is working, and a trading venue might use to monitor its performance against other markets.”
The interaction between domestic fragmentation (e.g., between TSX and Chi-X Canada) and cross-border fragmentation (e.g., between TSX and Nasdaq) holds implications for smart-order routing and best execution obligations.
“Traders are increasingly looking at interlisted stocks and the importance of smart-order routing,” Hakker said. “SOR isn’t confined to the local marketplace.”
Fidessa has enhanced its SOR to enable clients to stay ahead of the evolving Canadian trading marketplace and continue to anticipate and navigate the fragmented liquidity landscape. The Fidessa SOR includes low latency point-to-point FIX gateways for use with the TSX and alternative trading venues to further reduce latency and provide faster market access. These changes have allowed many Fidessa clients to achieve a 99 percent hit rate on displayed liquidity.
The enhanced SOR is one of several enhancements that Fidessa has made to its Canadian trading platform. “This is the latest stage in the evolution of our product and we have worked closely with our customers, regulators and other market participants to ensure it pre-empts the demands placed on our customers and serves them well in this continually changing and challenging marketplace,” Hakker said.
Other key changes to the platform include enhanced FX capabilities, which enable users to auto-hedge FX exposures in real time as well as a global order FX algorithm, to automatically convert orders in foreign currencies and symbols to Canadian prices and symbols.
Additionally, a cross border algorithm for Canadian securities that are interlisted in the U.S. facilitates better opportunities for arbitrage across different currencies. These new features provide traders with greater precision and better control across multi-asset, multi-regional trading strategies, said Hakker.