Liquidnet signs nine liquidity partners to block-trading platform

Source: Liquidnet

Liquidnet, the electronic marketplace for block trading, announced today its list of third-party Streaming Liquidity Partners (SLPs) that will interact directly with Liquidnet H2O.

They are: BLOOMBERG TRADEBOOK, BNY Brokerage - a subsidiary of The Bank of New York (NYSE:BK), Instinet, FutureTrade, Miletus Trading, Piper Jaffray (NYSE: PJC), EdgeTrade, UNX and Goldman Sachs Execution & Clearing, L.P. (GSEC) - a subsidiary of The Goldman Sachs (NYSE: GS).

"We are pleased to announce our partners and the vision that we have to create a trading environment where our respective customers can trade larger size with less market impact and with the anonymity they require," said Seth Merrin, CEO of Liquidnet. "The Liquidnet H2O model is the first and only one with the potential to bring together the entire institutional equities market in a single venue. Our Members' orders can now simultaneously interact with the largest pool of natural liquidity in the industry as well as smaller, execution-bound orders while providing price improvement on every execution. This model represents a critical shift in the way institutional trading will occur."

The latest version of Liquidnet's block-trading system, Liquidnet H2O, brings in execution-bound order flow from third-party liquidity sources to cross against its existing wholesale liquidity pool. Liquidnet H2O reverses the current model for buy-side traders; instead of institutional-sized orders being sliced and diced into the market in search of liquidity, Liquidnet H2O brings the smaller-sized orders to the buy-side trader (wholesaler), where the larger block orders (10,000 shares or more) will absorb those 400-, 300- or 200- share orders at a mid-point price without putting pressure on the marketplace, thereby delivering price improvement and reducing market impact costs.

SLP order flow interacts with Liquidnet H2O only when there is an order created by a Liquidnet Member - there is no "pinging" or guessing. Orders that interact with Liquidnet H2O are agency orders that are automatically routed off a smart router to an execution venue, with no direction or knowledge from human sales traders. Liquidnet H2O was rolled out to a small group of Liquidnet Members in September of 2005, and the company recently began the launch of the new product to its full Membership base.

"We are pleased to integrate Liquidnet H2O with BLOOMBERG TRADEBOOK," said Kim Bang, CEO at BLOOMBERG TRADEBOOK. "By aggregating block indication information with continuous market liquidity, clients have greater potential to extract larger (block) trade sizes with price improvement."

"As a pure agency broker, our sole focus is on achieving best execution for our global clients," said Mike Plunkett, President, North America, at Instinet. "To that end, we believe that our buy-side clients will find value in access to Liquidnet H2O, given its deep source of institutional-only liquidity. This is a mutually beneficial arrangement that should help the institutional trading community as a whole."

"Anonymity and control of order flow is paramount in ensuring best execution. With Liquidnet H2O, BlackRock can execute large orders efficiently, without market impact, simply by pairing off against the order flow coming through H2O," said Dave Dalzell, Director and Equity Trader at BlackRock, Inc., a $450 billion investment manager. "We are able to trade our orders in H2O where liquidity is coming directly to us instead of searching for it - that's a win for BlackRock clients. Plus, we maintain our anonymity since the orders are in Liquidnet," continued Dalzell.

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