Chicago-based Wolverine Execution deploys low and high touches to source liquidity Wolverine Execution Services (WEX), a subsidiary of Chicago-based Wolverine Trading, offers clients multiple venues for execution including a proprietary electronic trading platform, direct floor access, and an agency-brokerage trading desk.
“We are very focused on getting best execution in the options space,” said Tim Martin, head of electronic trading at WEX.
“We possess a broad knowledge base, deep understanding of the liquidity spectrum, and wealth of expertise in pricing and trading.”
With U.S. options liquidity fragmented across 11 exchanges, WEX deploys its Xenon algo to source liquidity.
“Given the complexity of the fee schedules of every exchange coupled with the advanced quoting systems of market makers, the Xenon algo yields superior execution quality while minimizing exchange fees and maximizes fill rates,” Martin told Markets Media. “WEX Xenon’s fill rates, which reflect the true price and size of the markets displayed, are considered to be the highest in the industry.”
According to Martin, WEX has leveraged Wolverine Trading’s intellectual capital to build a system powerful, fast and reliable enough to meet the requirements of experienced traders.
“Wolverine Trading has been a very significant options market maker for 18 years,” Martin said. “WEX was created eight years ago as an independent agency brokerage, utilizing the trading platform that had been built in-house for Wolverine Trading. WEX has its roots in derivatives trading, and it remains WEX’s specialty.”
Within the WEX platform, real-time data is dynamically streamed and packaged, giving traders an in-depth look into the options marketplace, offering ‘one-click’ order placement, plus volatility and spread trading.
The options markets cooled off last year after a remarkable multi-year run of volume increases, sometimes 20% per year or more. Tepid interest in equities, declining volatility, and a lack game-changing innovation contributed to diminished options trading volume.
“In 2012, the industry experienced the first down year in options volumes in decades. Equity markets took a major hit in their volumes, which affected derivatives volumes,” said Martin. “Nevertheless, we grew our business by a fairly significant amount.”
WEX’s success in the options business is largely attributable to the volatility trading tools available via the WEX platform, Martin noted. “It’s a multi-asset trading system, to which we’ve added sophisticated routing technologies, algorithms, and enhanced trading tools on the platform to meet needs of clients, whether trading options, stocks or futures,” he said.
The firm’s value proposition spans “our broad knowledge base, understanding of the liquidity spectrum, and expertise in pricing and trading,” Martin said. “As such, we are able to quickly and thoroughly evaluate multiple venues to attain a better execution for our clients. We also have a very good pairs trading tool, called Spread Agent, and have built powerful algorithms for trading options, such as Xenon.”
Several options exchanges use WEX’s router for directing order flow to other destinations.
“When an exchange gets an order directed to it and is unable to fill the order, by SEC rule, the exchange has to route the order to another destination,” Martin explained. “WEX is a major provider of the routing technology needed to get that done.”
In addition to its proprietary trading platform, WEX offers high-touch market access via its floor brokerage and institutional trading desk. “We have a significant floor brokerage on the CBOE floor in the index and ETF pits,” said Martin. “That high-touch model is based 100% on liquidity access and reducing market impact. As trades are printed, the floor broker operation disseminates market intelligence to clients.”
WEX says the combination of its direct linkage to options and equities exchanges, relationships with exchange and market makers, and access to alternative sources of liquidity, enables liquidity sourcing with minimal information leakage and market impact.
“We possess a broad knowledge base, deep understanding of the liquidity spectrum, and wealth of expertise in pricing and trading,” said Martin. “This enables us to quickly and thoroughly evaluate multiple venues to attain a better execution for our clients.”