Harborside+ and CDI deliver confidential block trading to Canadian traders
08 October 2004 | 304 views | 0
A newly formed joint venture between Harborside+ and Commission Direct Inc. (CDI), Canada's largest soft dollar dealer and fifty percent owned by RBC Capital Markets Inc., will address a growing demand on the part of Canadian institutional traders for greater anonymity in large block trading.
A neutral and confidential, institutional large block trading service, Harborside+ offers a liquidity pool in excess of US$4 billion maintained through IOIs (indications of interest) submitted by buy- and sell-side traders in the United States. CDI has over 150 clients, representing ninety percent of institutional traders across Canada. The joint venture combines Harborside+ technology and support with CDI's relationships, to mitigate market impact when trading large blocks of stock in Canada.
The partnership will enable Canadian institutional traders to submit both Canadian and U.S. IOIs to Harborside+, via an electronic interface. Harborside+ is developing a Canadian indications facility that will segregate Canadian and U.S. IOIs. Matches in Canadian equities submitted by Canadian firms will be sent to CDI for presentation to and negotiation with the buy-side firms there. Harborside+ has no role other than to provide the technology that facilitates the matching of IOIs.
With U.S. equities or interlisted stocks however, the leg of the trade that originates in the U.S. will be handled by Harborside+ and the other part of the trade, originated in Canada, will be handled by CDI. CDI will, in essence, be treated as any broker representing their natural client order flow via IOIs submitted to Harborside+. All Harborside+ will know is that the contra-side is CDI (underlying client is not revealed) and CDI will see Harborside+ as its contra-side, and not the underlying client. Upon execution, Harborside+ will print the cross with CDI on one side of the ticket.
"Our large block trading service has enormous appeal because it allows traders to maintain confidentiality and benefit from an increasingly deep liquidity pool, particularly where thinly traded stocks are concerned," said Harborside+ President & CEO, Michael Cashel. "This partnership brings the best of technology and human interaction together in a new marketplace."
"What Canadian financial institutions are lacking is a means to confidentially trade large blocks through an IOI mechanism that doesn't allow brokers to trade against their order flow," said Commission Direct President & CEO, Wayne B. McAlpine. "The partnership with Harborside+ will address this important gap."
"Harborside+ provides traders a neutral and confidential means for trading large blocks, something an ATS (alternative trading system) is unable to provide," said RBC Capital Markets Managing Director of Global Execution Services, John Reilly. "This partnership will deliver innovation to the Canadian financial markets through encrypted IOI matching and a larger, deeper liquidity pool."
Harborside+'s hybrid approach of technology and human intervention has proven successful for trading large blocks, especially when negotiating for larger sizes and accommodating conditional requirements. Harborside+ pre-qualifies buyers and sellers of size to minimize market impact and maximize trade size. IOIs start at a 25,000-share minimum. Harborside+ has the largest average crossed trade size in the industry at 72,000 shares per trade. Traders submitting IOIs to the Harborside+ confidential matching engine indicate side (buy or sell), symbol and price. IOIs can be accepted by Harborside+ through a variety of channels such as integration with a firm's order management system or via a FIX connection.
When the system locates a potential match, Harborside's client relationship database provides information that increases the fluidity of the negotiation process. Harborside+'s trading desk then assists counterparties in finalizing the transaction through private, phone-based communication that keeps identities confidential. Trades are executed by Harborside Securities, a totally independent registered broker-dealer.