Barclays Algo Uses IOIs to Find Blocks
One can teach an old trading algo dog a new trick.
But the old algo still has the same mission – help the buy-side trader find block liquidity. And the strategy incorporates the use of indications-of-interest (IOIs) to find bulk liquidity.
Barclays recently announced the launch of an algorithmic trading feature in the U.S. that allows users to post block interest in Barclays DirectEx, the firm’s block ATS that disseminates actionable IOIs to its subscribers to find the other side of an order. All posted order flow in DirectEx is natural block liquidity sent through Barclays’ liquidity-seeking algorithm, Hydra.
DirectEx was first launched in 2012 as the firm’s first actionable IOI platform for both natural and nonnatural liquidity. Since the launch of its TradePx – Trade Price – actionable IOIs for targeted markets representing internal desk liquidity, Barclays has refocused DirectEx on crossing natural block liquidity between clients.
How does it work?
DirectEx connects block interest between electronic and high-touch trading clients through its integration with conditional orders and IOIs. Electronic trading clients can post conditionally to DirectEx from Barclays’ algorithms1, while clients can respond to actionable IOIs linked to those orders.
Using a “Smart Post” IOI dissemination method, the IOIs generated from electronic orders are sent to DirectEx subscribers who are most likely to be on the other side of the trade, based on factors such as subscribers’ activity in a particular security. Clients can view and interact with Barclays’ actionable IOIs through one of several third party order management systems integrated with Barclays IOIs, many with click-to-trade functionality.
When an execution occurs in DirectEx between two clients, whether they are a high touch or an algorithmic trading client, they may be offered a follow-on, high-touch block trade if the opportunity presents itself.
Algorithm leverages machine learning to find inter-listed liquidity.
Buy-side wants new and better ways to find block liquidity.
Majority of managers say off-the-rack options don't cut the mustard.