Tag Archives: ats

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What’s Next? A Blockchain-Powered ATS for Equities

“What’s Next? Well, for those familiar with Patrick Byrne, the controversial and innovative founder of Overstock.com, one of the first online retailers to embrace the use of bitcoins, it should not be a surprise that Overstock’s chief honcho would ‘get the joke’ and realize its all about the underlying technology that powers cryptocurrency applications, known as distributed ledger. While bitcoin currency continues to encounter challenges in terms of mass embracement, the real grease that makes the makes the wheels turn is under the hood. With that, Overstock subsidiary “T0” (T-zero) is taking a page from both the industry consortium formed by R3 and the Senahill-backed Symbiont –both of which target institutional capital markets usage–and aiming it’s own sights on retail investors by setting to launch an equities-centric Alternative Trading System aka ATS powered by their own blockchain formula.

A distributed ledger is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, and/or institutions.
A blockchain is a type of distributed ledger, comprised of unchangable, digitally recorded data in packages called blocks.
Rob Daly of MarketsMedia (not related to MarketsMuse) provides the scoop..

Online retailer Overstock.com expects trading to begin on its blockchain-based alternative trading system before the end of the year, according to company officials.

The ATS will be operated by Overstock.com subsidiary TO as part of the company’s Medici Project, and it will only handle trades in the company stock, at least at first. So while it’s not an immediate competitive threat to the existing field of 13 U.S. stock exchanges plus several dozen ATSs, the initiative will be closely watched as a gauge of the potential of distributed-ledger technology in capital markets.

The ATS will write completed trades to its blockchain instead of routing them to the National Securities Clearing Corp., a subsidiary of Depository Trust & Clearing Corp., for clearing.

Overstock.com plans to prime the liquidity on the ATS through a new issue of corporate shares to existing shareholders the day before trading commences on the new trading venue.

judd bagley blockchain ATS
Judd Bagley

T0 officials plan to formally announce its partnership with a broker-dealer on Sept. 12. “For those who want to trade on the ATS, they will have to create an account with the broker-dealer,” said Overstock’s man-in-charge Judd Bagley, who declined to name the brokerage firm.

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Investors will be able to select from multiple “very vanilla” order types, which are still in development, he added. T0 may use a so-called maker-taker rebate model to encourage liquidity, but officials have not made a final decision.

The new trading venue is a mix of internally developed technology and the technology T0 acquired with its purchase of order-routing firm SpeedRoute in October 2015. T0 built its matching engine internally as well as the necessary interfaces to the rest of the U.S. equity marketplace.

The company, in conjunction with Bay-area consultancy PeerNova, also developed a proprietary blockchain architecture for the ATS instead of using Bitcoin, Ethereum, or Ripple.

To continue reading the story from MarketsMedia, please click here

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Another Secondary Market To Trade Equity Crowdfund Deals

On the heels of an Oct 6 story at MarketsMuse about UK-based “Crowd2Fund.com”, now there’s another fintech entrant seeking to introduce secondary market trading of crowdfund deals. In a news release this week, Australia’s Equitise is joining with Syndex to create a new Alternative Trading System (ATS) to facilitate secondary market for crowdfunded securities.

In separate equity crowdfund industry news courtesy of industry portal RaiseMoney.com  the US Securities & Exchange Commission passed new rules for equity crowdfunding deals, which is expected to create a title wave of new opportunities for the brokerdealer industry.

Oct. 27 (BusinessDesk) – Equitise, the only trans-Tasman equity crowd funder, will launch a secondary market allowing investors to trade in real time in Australia and New Zealand in shares of crowd-funded ventures, which have typically been more illiquid investments.

The Auckland and Sydney-based firm, in partnership with Syndex, will build an online exchange where investors can buy and sell shares in Equitise crowd funded companies after the initial offer has closed, using the online exchange during trading periods.

“We want the companies we crowd fund to have a safe, secure and transparent way of trading securities,” Equitise co-founder and New Zealand manager Will Mahon-Heap said in a statement. “It combines Equitise’s expertise in running successful crowd funding campaigns with Syndex’s online exchange to provide companies with all the tools and resources they need to govern and manage shareholder interests.

“It will also provide our companies with access to new investment communities to stimulate trade in secondary markets and help generate more interest in crowd funding opportunities.”

Auckland-based Syndex has applied to the Financial Markets Authority to become a licensed financial products market, even though the Financial Markets Conduct Act does not currently require it to do so. Under the FMA’s equity crowd funding licensing regime, a platform such as Equitise wanting to give shareholders more liquidity in their investment would first need to get sign-off from the regulator to build a secondary market, where investors could trade equity up to an annual cap of 100 trades. Using Syndex means Equitise does not need to go through that process.

Companies are able to raise a maximum of $2 million from the ‘crowd’ in exchange for offering equity through crowd funding platforms.

mike Jenkins, Syndex
Mike Jenkins, MD of Syndex

Mike Jenkins, MD of Syndex, called the partnership a fantastic endorsement of Syndex’s ability to provide a common, go-to place for investors that have an interest in investing and trading in proportionally-owned assets. “We’re excited to be working with Equitise to launch in the private company equity market here in New Zealand and across the ditch in Australia.”

“We’re creating a trusted investment environment that promotes confidence and enables investors to tap into the substantial global equity crowdfunding market. That will not only create value for individuals and companies, but also stimulate growth and create wealth for the wider New Zealand economy.”

The financial markets regulator has said the legislation isn’t prescriptive when it comes to what any ancillary market for equity crowd funded companies might look like.

“Our overall concern is to ensure that the services run, the original offer and the secondary market, in a fair and transparent way. But in terms of how a secondary market might be run, we’re agnostic in how a crowd funder might do that,” Garth Stanish, director of markets oversight at the FMA, told BusinessDesk in September. “We haven’t been prescriptive around what we look for. We will expect to engage with each of the crowd funders as they come to us and there’s a range of options in how a crowd funding service could choose to structure a secondary market.”

Since the first licences were awarded in July last year, New Zealand now has seven equity crowd funding platforms and 37 offers have either been run or are underway, of which 24 successfully raised a total $13.3 million.

Competition to provide investors the ability to trade in their crowd funded equity is heating up.

Unlisted, the alternative share trading platform which also runs equity crowd funding platform CrowdCube, plans to offer crowd funded companies cheaper fees to list on its market. Snowball Effect, which is New Zealand’s largest platform to date in terms of capital raising, also has a secondary market offer waiting, which would see it facilitate trading periods for companies on their own websites, rather than through a multi-issuer market.

In August, Commerce Minister Paul Goldsmith granted an exemption from licensing requirements for Unlisted, which means the market can continue as an unlicensed platform, but its website must make its unlicensed status clear and investors will need to sign a declaration acknowledging the risks involved.

In a July 20 brief to the minister, obtained under the Official Information Act, the Ministry of Business, Innovation and Employment says an exemption will set a precedent for future applications “potentially including crowd funding platforms seeking to extend their licences to provide secondary markets”. In an Aug. 7 note to the minister, the FMA said while there was opposition to Unlisted’s exemption from some industry operators, whose names were redacted, others were in favour “albeit they did not consider that Unlisted would fill the secondary market gap for crowd funded companies.”

The Equitise-Syndex secondary market offer is different from Unlisted, with Syndex offering a peer-to-peer trading model, whereas Unlisted operates via brokers. The Syndex platform also has built its exchange using the cloud, a spokesman for Equitise said.

Syndex is a privately held digital market maker.

 

 

 

Buyside Block Trading Venue Luminex Readies Launch

As if there were not enough electronic trading platforms,  the buyside remains determined to have their own equities trading platform open only to buy-side block trading peers. MarketsMuse Tech Talk Editors tip our hats to FierceFinanceIT.com  for the following update re  Luminex Trading & Analytics, the ATS block trading venue backed by a consortium of large asset managers, which recently announced an updated management team in preparation for the venue’s Q4 launch.

The new management team in place is led by Jonathan Clark, former managing director and head of U.S. equities trading a BlackRock, who will serve as Luminex Trading’s CEO. Clark replaces interim CEO Michael Cashel, who will return to his position as SVP of Fidelity Trading Ventures. Plans for Clark to take over as permanent CEO were previously announced, and as of Tuesday he has officially begun the role.

Plans to build the Luminex Trading venue, which is backed by nine leading investment managers that collectively manage approximately 40 percent of U.S. fund assets, were first announced in January.

The venue will be a buy-side only block trading platform “open to any investment manager primarily focused on the long term and with the desire to trade large blocks of stock with other investment managers,” according to an earlier announcement from the company. The nine investment managers in the consortium backing Luminex are BNY Mellon, BlackRock, Capital Group, Fidelity Investments, Invesco, JPMorgan Asset Management, MFS Investment Management, State Street Global Advisors and T. Rowe Price.

David Hagen, Luminex
David Hagen, Luminex

Luminex Trading announced four other members of the management team this week. Brian Williamson will be head of sales, tasked with further building the client base. Williamson was previously senior global relationship manager with Liquidnet. James Dolan is chief compliance officer, joining the company from Fidelity, where he was previously vice president of compliance for Fidelity Institutional. David Hagen will head product development as Luminex Trading’s new head of product. He was previously director at Pico Quantitative Trading. David Consigli is the company’s new controller, joining from IDB Bank.

Luminex says its platform will offer investment managers lower-cost and more efficient block trading, with transparent trading rules and protocols.

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Finra, Fixed Income and FinTech—Fixing What Folks Keep Saying is Broken

MarketsMuse blog update profiles a proposal from FINRA which proposes pre-trade transparency for fixed income automatic trading systems operators. This update is courtesy of  Traders Magazines’ article, “A Step Closer to a Fixed-Income NBBO” with an excerpt from the article below.

A modest proposal made by the Financial Industry Regulatory Authority (FINRA) aims to have fixed-income alternative trading system (ATS) operators to submit a weekly report that contains all of their quotation data for TRACE-eligible corporate and agency debt-securities to the regulator.

Such data would help FINRA better surveil the growing electronic fixed-income market, especially retail trades, according Robert Colby, the chief legal officer at FINRA.

“We would love to have this information,” he said when speaking the Investment Company Institute’s capital markets conference. “We do not get them now, so we are not super familiar with it. We’ve gotten it in batches at times but are not familiar with it enough to know how to work it into our surveillance system, which is our primary line of interest.”

FINRA officials declined to comment on the proposal further citing that it was still out for comment at press time.

According to the proposal’s text, FINRA would not disseminate the ATS-provided data publicly and use it solely for regulatory and surveillance purposes. However the text also states that FINRA may analyze the data for “the potential value and feasibility of public dissemination in the future.”

To read the entire article from Traders Magazine, click here.

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Here We Go Again: OpenBondX Proposes Launch of Another Electronic Bond Trading Platform

While contemplating today’s news release profiling the proposed launch of the latest corporate bond electronic trading platform “OpenBondX,” MarketsMuse senior editors respectfully borrow Yogi Berra’s best line  “It’s like déjà vu all over again.” But for those too young to remember that most famous Yankee, we’ll toss you a softball: “Here we go, yet one more hat thrown in to the ring of electronifying the corporate bond market. We’ve almost lost count as to the number of initiatives that aspire to change the dynamics of buying and selling corporate bonds within the institutional marketplace, but the good news is this group is apparently not deterred by the number that have tried and failed to crack the cultural egg typical to those focused on fixed income trading.”

OpenBondX (OBX), an Alternative Trading System (ATS) upstart, unveiled plans to revamp its electronic bond trading in Q1 2015 with its new systems launch for both non-traditional and traditional providers.

The platform offers liquidity access via bond markets in the company’s first multi-tiered system. OBX’s ATS system targets both buy and sell-side participants, given the acute need for a platform that bridges institutional bond traders and natural liquidity suppliers in tandem.

At present, the landscape of corporate bond traders has changed due to shifting regulatory requirements and capital rules that has led to the mitigation of inventories by approximately 70% since 2008, according to GreySpark Partners’ estimates. The firm estimates that in 2014, buy-side firms held 96% to 99% of the U.S. corporate bond inventory in 2014.

According to OBX cofounder and CEO Alistair Brown in a recent statement on the platform, “every facet of OpenBondX and its technology have been built from the ground up to encourage providers to contribute liquidity and safely expose orders to the most aggressive pricing available, all under absolute anonymity.”

“By automating the bond markets as such and attracting liquidity from non-traditional providers, we believe our ATS will drive true two-way markets and significantly reduce trading costs,” he added.

Liquidity Fragmentation

The primary draw of OBX’s platform is its ambition to unlock fragmented liquidity, which aims to stymie information leakage and negative pricing issues that has become endemic in fixed income markets.

Helping to that end is a robust array of internal risk controls to aid market participants. As such, real-time utilities such as value-at-risk (VAR) validation on executed trades and open orders, aggregate value traded, duplicate order check and user access controls are afforded.

OBX has revealed a launch date for Q1 2015, with fully compatible trading for all US corporate bonds.

 

“Navesis-ETF” Launches Today: 1st Euro-based Alternative Trading System for ETFs

A joint partnership between Normua Holdings and inter-dealer broker Tradition PLC formalized the launch of the ETF industry’s first electronic exchange platform.  Based in London and designed for the European theatre, where ETF transparency is often problematic, “Navesis-ETF” is  intended to provide “qualified customers” the ability to trade ETFs in real-time, and enable investors to create and redeem ETF units based on the fund’s net asset value (NAV). The initial launch of the platform will facilitate trade in upwards of 100 different Euro-centric ETF issues.

According to Rupert Hodges, managing director of  TFS Derivatives, the brokering division of Compagnie Financiere Tradition that has partnered with Nomura, ” Up until now, institutional investors in ETFs on the primary market could only buy and sell units via market makers and other ‘authorised participants, accepting an indicative price determined by the supply and demand for the ETF offered. By offering the ability to trade based on NAV, Navesis-ETF is a game changer.”

Lee Burrows, Head of Delta One, EMEA for Nomura added, “Listing on a MTF will allow us to provide more liquidity and maximise efficiency in pricing.” Navesis-ETF has been in development for almost a year and according to the joint venture press release, the platform has been beta-tested for the past two months by clients that include Credit Suisse, HSBC and UBS.  Burrows stated there will be a minimum order size for units of 25,000-100,000 ETF shares and will operate in two phases. From 0900-1200 GMT it will operate a continuous call phase, accepting bids and offers. Then, from 1200-1215 GMT, there will be a “dark option” phase similar to dark pool trading. It will also provide an auction process once a day.