Liquidnet Canada Rolls Out Block-Trading Algos
International buy-side traders looking for block liquidity in Canada are getting a whole new suite of algorithms, courtesy of Liquidnet Canada.
Liquidnet Canada has announced its “Next Gen” algorithmic suite offering – comprised of three tools all having one goal – get the buy side a block bigger than 10,000 shares. The three algorithms are Liquidnet Dark, which is already available in a different form in the U.S., Liquidnet Barracuda and Liquidnet Sweep-Then-Post.
“An algorithm is only as good as the liquidity it can access. Our Next Gen Algos are the only ones that tap into Liquidnet’s unique pool of deep, natural liquidity, while also intelligently sourcing liquidity from both the lit and dark markets,” said Rob Laible, Global Head of Equity Strategy.
The move into the Great North’s markets seemed a natural move for Liquidnet, as these algos in similar form have been successful in the US and EMEA, Liable added, and they were recently launched in APAC too. Liquidnet claims that its liquidity-seeking algos are the only ones that fully leverage Liquidnet’s network of more than 840 global institutions offering over $2.2B of average daily liquidity in Canadian names.
“Our Next Gen algorithms have become top performing block seeking algorithms in Europe and the United States and we believe they will be transformative for our Member base here in Canada,” said Peter Coffey, Head of Liquidnet Canada. “We are focused on centralizing block liquidity in Canada and bringing Canadian liquidity to the world. In 2016, more than 50% of the volume traded in Canadian equities in Liquidnet was via non-Canadian domiciled firms.”
Laible told Traders Magazine that Canada was highly desired by global traders given its less fragmented nature (when compared to the U.S.) and that the bank-dominated marketplace is viewed as more safe than those in America
Last year represented a record year for the Great North as total principal traded was up 49% year-over-year at $13.2 billion. Liquidnet Canada has also seen a strong start to 2017 with total volume in shares in February up 40% and total principal traded up 21% compared to the previous year, largely driven by the buy sides’ increasing need to source quality block liquidity.
By applying its global algorithmic know-how in Canada, both Laible and Coffey said Liquidnet was able to offer its Next Gen suite more efficiently and quicker to market than some of the other regions. For example, Liquidnet Dark was already available in several other geographies before making its debut in the Great North.
Now, let’s look at the roster. In addition to Liquidnet’s benchmark algorithms -VWAP, TWAP, POV, IS, Close – the suite now includes liquidity-driven strategies.
First up is the aforementioned Liquidnet Dark, which looks for liquidity in Liquidnet’s own pool first via a conditional order and then routes orders to other non-lit venues, including exchanges via a non-displayed order type . According to Coffey, the key difference here between how it works in the US and Canada is that this algo also sends orders to Canada’s venues.
Next is Barracuda. This strategy is designed to simultaneously seek a large block within Liquidnet while also opportunistically searching for available liquidity across external venues. This algo can also route child orders to the displayed lit exchanges as well as the non-displayed order type – Barracuda has 3 aggressiveness settings – Low, Medium, & High. These configuration settings dictate how to post limit orders externally, when to cross the spread, and participation rates.
Lastly is Sweep-Then-Post. This strategy is designed to rapidly and aggressively take liquidity. Typical usage scenarios include striking tactically at attractive price levels and quickly completing small orders.
“After making these algos for the US, it wasn’t that difficult to configure them for the Canadian market,” Coffey said. “It wasn’t a long six-month type of configuration time as the market here is not as fragmented. Also, these algos are optimized for block liquidity.”
Coffey added that all the algorithms are in use by buy-side traders across the globe.
“More than 50 percent of Canada stock trading was from non-Canadian domiciled firms,” Coffey said. “ We’re seeing more global clients trade in Canada and that’s who these tools are targeted at. As an agency-only firm, these help us position us as the firm of choice.”
Trading platform addresses the market's need for performance, transparency and control.
Forensic analysis makes ’black box’ algorithms more transparent.
With Eugene Kanevsky, James Redbourn, and Joanna Wong, CLSA
Credit Suisse execs assess what the lit order book on exchanges tells us -- and what it doesn't.
Automated order-routing process helps the buy side trade more systematically.