19 October 2017
Steve Grob

Fidessa Fragmentation Index

Steve Grob - Fidessa

137Posts 529,284Views 3Comments

Jumping the Queue for Order Flow

19 February 2010  |  3338 views  |  0

A couple of announcements have caught my eye over the past few days. This week saw the launch of a smart routing service called CYCLE from BATS Europe and, last week, I was at a seminar in Stockholm where Turquoise’s Adrian Farnham presented its own liquidity aggregation service - TQ Lens. Both of these announcements highlight how venues are starting to overlap with other players in their continual quest for order flow. The rationale is simple - by offering to onward route any order that doesn’t match on their own platform, these operators hope to encourage more people to use their service in the first place. It’s a tricky game though and potentially takes them into the space occupied by the broker community, i.e. finding the optimum destination for their customers’ orders. Of course, the brokers are offering matching platforms too - in the form of their own dark pools - that aim to provide more effective executions for some types of order flow. The net result is confusion over whether you are using any such service as a destination, as a smart route to other destinations, or both.

This raises some interesting technical challenges as any particular order may run through a number of potentially different pieces of smart routing kit before it reaches its final destination. It’s not obvious how the “smart” decisions made at the beginning of the order’s lifecycle will persist through these other systems (especially if they’re from different suppliers). This is different from the situation in the USA where Reg NMS forces venues to onward route any order that it cannot match at the NBBO (National Best Bid and Offer) and so there is an agreed standard for how venues operate in this space.

Whether you are a broker or a venue the objective is the same – to move ahead of your competitors in the queue for order flow. In the absence of any defined rules as to how to play the game it’s not surprising that both brokers and venues are looking to jump the queue any way they can.

TagsTrade execution

Comments: (0)

Comment on this story (membership required)

Latest posts from Steve

Why you’ll never be ready for MiFID II

12 September 2017  |  4642 views  |  0 comments | recomends Recommends 0 TagsTrade executionRisk & regulation

So that's nice and clear...

31 August 2017  |  5302 views  |  0 comments | recomends Recommends 0 TagsTrade executionRisk & regulation

Relocation, Relocation, Relocation

14 June 2017  |  5670 views  |  0 comments | recomends Recommends 0 TagsTrade executionRisk & regulation

MiFID II - the best thing that ever happened?

08 June 2017  |  8696 views  |  0 comments | recomends Recommends 0 TagsTrade executionRisk & regulation

Be careful what you wish for

26 April 2017  |  5393 views  |  0 comments | recomends Recommends 0 TagsTrade executionRisk & regulationGroupMiFID

Steve's profile

job title Director of Group Strategy
location London
member since 2009
Summary profile See full profile »
I am responsible for strategic development at Fidessa. This includes the development of new geographic markets and strategic partnerships and driving new industry initiatives. As part of this I head u...

Steve's expertise

Member since 2004
130 posts3 comments
What Steve reads

Who's commenting on Steve's posts