Liquidnet Automates Targeted Invitations for Algos


High-touch trading and algorithms, two great tastes and technologies that go great together?

At first glance, it wouldn’t appear so. In fact, it could be considered contradictory.

But not at Liquidnet, which recently unveiled its new Virtual High Touch (VHT) trading technology and concept. The goal of VHT, as told to Traders Magazine by CEO Seth Merrin in a recent interview was to make the buy-side trader’s job as easy as possible using the latest technology. VHT technology is designed to deliver real-time market insight and a complete execution ecosystem of liquidity opportunities, providing traders with new ways to source liquidity and tools to achieve best execution and generate alpha.

Rob Laible, Liquidnet

The newest addition to its stable of algorithmic software is VHT’s Targeted Invitations or as the company calls it, Targeted Invitations from Algos. In short, this is the integration of one of Liquidnet’s most popular liquidity-seeking products (TI) with its Next Gen Algo suite. Targeted Invitations allow buy-side traders to intelligently seek out liquidity from other asset managers that they may not be actively trying to trade and that may not be available on any blotter.

So, what’s new here?

As Rob Laible, Liquidnet’s Global Head of Equity Strategy, explained to Traders Magazine, Targeted Invitations previously had to be selected or initiated by the trader in order to activate the program. But now, the game has changed.

“Our goal is to minimize the amount of time buy-side traders have to spend searching for liquidity,” Laible began. “If I used the Targeted Invitation in the past, I manually launched it and entered all my constraints. It then reaches a targeted contra-party based on my criteria and is able to execute. What we’re doing now is taking that process and automating it by having the algo-engine determine if and when and to who you should send it the TI to.”

Laible added that now, the selected algorithm has an additional pool of liquidity or routing destination aside from Liquidnet’s universe, the Targeted Invitation. The TI has certain criteria in order to be eligible as a routing destination, he added.

“One, an obvious one, would be how much liberty do you have in the trade,” Laible explained. “It wouldn’t be appropriate for somebody who only had like a thousand shares to send a Targeted Invitation because chances are, it is an easy to fill order. TI from algos will also consider which algo you’re deploying, the timeframe and your benchmark. So, it considers those kinds of factors, and then assuming you want to go ahead and send an invitation, the algo will go through it’s logic and then determine whether or not to send it.”

And, for those traders who want more control, Targeted Invitations for Algos can turned on and off via a toggle switch.

“And remember, even though an algo may be able to utilize TI that  is not to say that it will on every occasion,” Laible continued. “If the trader defaulted it on, the algo may or may not send a target invitation based on the various criteria that I mentioned before. Otherwise, if defaulted off it could be used manually as in the past.”

Targeted Invitations was first launched for equities in November 2015 and is now available to over 670 of Liquidnet’s clients firms globally. Focused on the block, the average execution size globally via TI is $2.4M, and the largest single execution to date is $156M.

Relatedly, Liquidnet also tinkered with its global algo suite, Block I Would, giving the trader greater control and access to seek out block liquidity. Traders using Liquidnet’s Next Gen Algos can now control the quantity and price to trade a block in Liquidnet and the venues accessed on a conditional basis, irrespective of the trade schedule.

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