Liquidnet, the global institutional marketplace, today announced that its recently-introduced Supernatural strategy "Adaptive Optimum" (AO) has become its most-effective strategy for executing one million share-plus orders.
This Supernatural strategy is the first strategy to incorporate the probability of internal block crosses within Liquidnet's industry-leading liquidity pools while intelligently tapping public markets when timing and market impact conditions are optimal.
Propelled by access to Liquidnet's block liquidity, this Supernatural strategy distinguishes itself by delivering results that improve as order sizes increase. The strategy employs a unique method of optimization that anticipates the size and inter-arrival times between crosses in order to design an optimal trading schedule. As a result, the impact and timing risks leading up to a cross of a trade are minimized, which in turn maximizes the internal crosses in Liquidnet -- which rose to an average 65% for US equities in Q1'09.
As more and more traders reported markedly superior AO results for large orders, average order size of these 1MM-plus share strategies climbed to over 1.7MM shares, improving the crossing rate further.
Driven by the success and adoption of million-share orders, volume for Liquidnet's Supernatural strategy suite has grown 186% over the same period last year, to over 24 million shares per day.
"Increased market volatility, the precipitous decline in trade size on exchanges and ECNs, and the heightened demand for liquidity have negatively impacted institutional investors," said David Fellah, Liquidnet's Head of Quantitative Strategy and Analysis, the team that designed AO. "Our Member trading results with AO have shown that the larger the order, the better the performance. This has been to the benefit of all of our Members, many of whom are among the largest players in the buy-side community, and leads to efficiencies for all investors, from institutions to individuals."
Fellah continued, "Performance improves with size due to the dependency between the magnitude of the order, and the probability of a cross against our natural pool of liquidity. At Liquididnet, our Members are able to execute large orders, and interact with the deepest pool of natural liquidity available which is of paramount importance to their performance."
The performance and success of Liquidnet's Supernatural product suite has also been instrumental in attracting additional liquidity in the form of new Streaming Liquidity Partners (SLPs) joining Liquidnet H2O(R). In total, there are now 26 SLPs connected to Liquidnet H2O, including our new SLPs, OES Marketgroup and Citi's Lava Technology. Our SLPs collectively contributed nearly 10 billion shares of additional liquidity daily (Q1'09) in US equities, for Liquidnet Members.
A registration statement relating to the Class A Common Stock of Liquidnet Holdings, Inc. has been filed with the SEC, but has not yet become effective. The Class A Common Stock of Liquidnet Holdings, Inc. may not be sold nor may offers to buy be accepted prior to the time that the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.