Agency broker Bloomberg Tradebook is shedding new light on dark pools with the launch of the B-Dark algorithm, a platform the firm says allows traders to execute dark liquidity orders with more control and visibility.
The new algorithm enables traders to direct how aggressively they want it to pursue dark liquidity, while allowing them to opt out of venues at their own choosing, the company says.
“Previously Bloomberg Tradebook algorithms did not have the capabilities to control the level of aggression, the dark interaction or to decrement, but these are all part of the B-Dark algorithm,” says Bloomberg Tradebook Chief Executive Ray Tierney.
“On the other side, relative to venue transparency, if they want to opt out of a certain venue they can do that as well.”
The company says that B-Dark can protect traders from the toxic flow that sometimes resides in dark venues through anti-gaming logic, including order randomization and real-time venue slippage analysis. The algorithm is also targeted to mid and small-cap traders since they face a steeper challenge than their larger counterparts in finding high quality liquidity, Tierney adds.
“The real liquid names, the Cisco’s, the IBM’s of the world, there’s a lot of liquidity in those and I think there is less concern,” Tierney says. “The small and mid-cap space is where your liquidity issues reside. That’s where your biggest implicit costs are associated because of some of the inefficiencies in optimization that occurs in managing that liquidity.”
The company also announced that it formed agreements with leading dark liquidity providers like Credit Suisse’s Crossfinder and Goldman Sachs’ Sigma X, to enable traders to see where their orders being filled in real-time through Tradebook.
Tierney reveals that Bloomberg Tradebook has such agreements in place with “90 percent” of the dark liquidity providers mentioned in surveys conducted by Rosenblatt Securities Inc. “And we have ongoing conversations with those other folks as we seek to bring them on, and it’s not a question of if, but when.”
In order to be truly effective, the ability to access real-time information from dark pools is crucial for traders in the current environment, Tierney adds.
“Having that information at the end of the day, or the end of the week or the end of the month, while it’s important and it’s good information, it doesn’t help you respond to the situation in front of you,” Tierney explains. “So it’s incumbent for the buy-side to truly understand how they’re navigating in in the overall landscape.”