Liquidnet Expands Quant Business

Terry Flanagan

Liquidnet has launched its Execution & Quantitative Services (EQS) group headed by industry veteran Rob Laible, who joined the company earlier this year. The trading-venue operator is seeking to provide its network — which includes more than 770 asset managers — with new and more efficient ways for traders to source liquidity and achieve best execution.

“The purpose is to look at the non-core ATS business and to partner with clients to help them navigate this complex role that we find ourselves in, between fragmented markets, smart order routing and sometimes bad behavior in dark pools,” Laible told Markets Media. “As an agency-only unconflicted broker that already has a great relationship with our members through our core product, it’s a logical extension of what we already do.”

Rob Laible, Liquidnet

Rob Laible, Liquidnet

The focus in 2015 will be to expand the offering to all the markets where Liquidnet operates while delivering the “next generation” of execution services and quantitative trading strategies to its community, Laible said.

“One of the areas that we’re very focused on is quantitative analytics and transaction costs analysis,” he said. “There is clearly an opportunity to help clients build a road map to how they want to trade and to think about what algo they may want to use, as well as giving our client service team some tools that alert them to how algos are behaving and make recommendations to switch the behavior.”

“We have a clear model in terms of what we do and what we don’t do,” he continued. “We don’t commit capital, we have no proprietary trading, we don’t do risk bids, we don’t do guarantees. As an agency-only non-conflicted broker, we’re going to be transparent with our clients in terms of what we’re doing and we’re going to be very consultative in terms of how they want us to represent their order flow outside of the Liquidnet ATS.”

Laible worked in the program trading area at Lehman Brothers, where he ran one of the sales trading teams that did cash programs for electronic listed derivatives. Following Lehman’s bankruptcy, Nomura bought Lehman Asia and Laible rebuilt all of Nomura’s electronic trading products in Asia.

Liquidnet has expanded its EQS team with three new hires who will report to Laible and help to design Liquidnet’s suite of execution algorithms and analytics while also providing quantitative research and market structure insight. They include Scott Kartinen (former executive director of algorithmic trading at UBS), Roberto Malamut (former quantitative analyst at Agoge Capital), and Amar Vaidya (co-founder of Shuban Capital, a quant fund for equity trading in the U.S. markets).

“One of the mandates that I had was to understand what we have today, where we want to go tomorrow and make sure that we have the right pieces in place,” said Laible. “These hires have really good knowledge around algo development, smart order routing and quantitative research.”

There has been a lot of commission compression and a number of sell-side firms have tried to figure out how to do more with less, including trying to leverage client order flow and trying to extract value from it. In some cases that led to bad behavior in terms of preferential treatment in dark pools, potential leakage of information, signaling, trying to become smarter about the firms proprietary trading flow based on client order flow, said Laible.

“There were certain incentives in place that led to some bad behavior,” he said. “Some of that trust has been broken that traditionally resided between the buy side and sell side.”

Institutional clients “have a fiduciary responsibility to their shareholders for best execution,” he said. “They increasingly want to take control of their order flow and partner with people that they can trust are being completely transparent in the execution process.”

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