New Kid on the Trading Block Promises Sell Side Revolution
A new trading venue, which is set to launch across Europe at the end of the first quarter, claims it will revolutionize how sell-side firms can execute block trades.
Called Squawker, the new London-based negotiation venue aims to allow sell-side firms to execute block trades anonymously using social-networking technology by helping firms find liquidity.
“Squawker is all about introducing buyers and sellers together and putting them into a private negotiation to agree trades,” said Christopher Gregory, co-founder and chief executive of Squawker.
And in its latest move, Squawker has just signed a partnership with financial data vendor SIX Financial Information to provide real-time pan-European market data via SIX’s Market Data Feed, allowing Squawker participants to execute pan-European block trades always at the consolidated mid-price and consolidated volume-weighted average price (VWAP).
Squawker, which will be classed as a ‘discretionary system’ and regulated as an investment firm under MiFID rules—and not as a multilateral trading facility—claims it will be unique in its ability to provide best execution for the sell side at the consolidated mid-price and consolidated VWAP.
“Squawker’s collaboration with SIX Financial Information is crucial to the venue’s success,” said Gregory. “Using SIX Financial Information’s data via the Squawker platform, Squawker’s sell-side trading participants of mid-price interest will always execute at the consolidated mid-price of Europe’s national exchanges and major MTFs. Similarly, VWAP-interested participants will be able to agree a block trade at any point throughout the day that is guaranteed to execute at the day’s consolidated VWAP price.
On Squawker, sell-side firms will be able to negotiate and trade large blocks of shares without causing ‘information leakage’ and exposing the trades to predatory high-frequency trading firms who would thus move the market against such orders.
“Squawker has the potential to redefine the way the market trades block sizes,” said Martin Cole, managing director of SIX Financial Information.
“No longer will firms need to slice up their large trade sizes and drip them slowly into the market over a period of time, risking impact cost or the unwanted attention from detrimental algorithmic flow.”
Gregory says that Squawker, which also recently signed a tie-up with BT Radianz Cloud to use its financial technology infrastructure, will be targeting the “10%-15% of pan-European equity trading that is still negotiated predominantly over the telephone” by the sell side.
Buy-side institutions usually use dark pools, operated by broker-dealers, to trade large blocks anonymously but sell-side firms trading large blocks of shares usually do so via inter-dealer brokers. But Squawker aims to cut these costs by doing away with the financial middleman by allowing firms to trade securely and anonymously on an electronic basis.
Gregory says he has received much positive feedback from the sell side for the new venue.
“We have seen now a fraction short of 100 sell-side firms across Europe and every single firm we have talked to has said ‘we agree, there is a real problem doing block trades on the order books’,” said Gregory.
“Every firm we have talked to has said there is no solution today for the sell side to be able to find the other counterpart, the other sell side, to execute that block. That is driving the strong positive reaction we are getting.”
CEDX opened on 6 September, offering contracts on Cboe Europe single country and pan-European indices.
The MOU covers certain security-based swap dealers and participants.
Equity underwriting on European exchanges rose 70% in the first half.
The analysis is based on transactions publicly reported by 30 European APAs and venues.
A similar service is available on the BIDS platform in the US equity market.