MCA Q&A: Roman Ginis, Imperative Execution
Imperative Execution won the 2020 Markets Choice Award for Best New Product, Equities, for its IntelligentCross ATS
Why did you start IntelligentCross?
We felt market impact is killing investment returns for everyone and the problem is at the exchanges – where buyers and sellers come together. Traditional exchanges were not built for this. Managing market impact on an exchange today is like driving a stick shift – traders have to do all the work yanking orders back and forth at the right times just to keep it in check. This has become incredibly expensive, with many firms spending 10’s of millions of dollars per year on trade execution. We wanted a smarter exchange that drives more like an automatic in helping trading desks execute better.
Our team came out of trading, running portfolios or trade execution at firms where market impact was our largest cost of trading. We had two big ideas: 1) to create a venue that would automatically reduce market impact as part of its matching process and 2) to make it adaptive to market conditions – that’s where AI comes in.
We launched IntelligentCross in 2018 as the first US equities ATS that uses artificial intelligence (AI) to minimize market impact. It has now matched about $300 Billion since launch and saved investors an estimated $30M in execution costs.
How does AI help IntelligentCross do that?
The markets are highly volatile, with regime changes and extreme events on a regular basis. When the market swings from a VIX of 15 to 80, like it did this March, the ability to adapt really matters. AI is the best technology we have today for adapting to change. It involves measuring performance, (machine) learning from data and acting on the results. IntelligentCross uses AI to schedule when orders match, typically micro/milliseconds apart. As market conditions change, our AI optimization process ‘solves for’ the optimal times to match to minimize market impact, while maximizing liquidity.
How does IntelligentCross fit into the exchange/ATS ecosystem?
Leading trading firms use IntelligentCross like an exchange. We offer displayed and non-displayed orders via regular order types and match in price-time priority. No one has to change a single line of code to trade here. When algos interact with IntelligentCross, everything works like any other exchange/ATS – effectively, it’s plug and play.
What have been the results for clients so for?
We consistently rank at the top of client’s internal TCA reports and independent venue analysis from brokers. Our metrics show that over the last quarter our midpoint cross has about 78% lower market impact than the exchange midpoint average, measured by market reaction (the “markout”) after trades. Bernstein, RBC and Clearpool recently created execution reports ranking us at the top for quote stability – a key measure of how close trades are to an efficient market.
Did that performance hold up in the first quarter volatility?
Yes, very much so. March’s volatility offered a good opportunity to stress test the IntelligentCross model and the execution quality stats prove that it works in all market conditions. Our AI adapted to the new volatility regime and delivered close to 4 times lower market impact than that seen on leading exchanges. Our market share of trades also increased by 20% during this period and we’ve now in the top 10 ATSs by the number of trades (per FINRA). It proves that we’re adding increasing value to investors, especially in periods of highly challenging markets.
Streaming blocks change the basis of matching and price discovery so institutions can find new liquidity.
Concerns have been expressed around the value of these reports.
Innovation in displayed markets is important as off-exchange volumes are rising.
The new service will help improve execution quality assessment across brokers.
There will be significant improvements in the process and result of TCA & best execution reports.