Colocation is also something that Barclay can extend to its smart order routers. “We’ll seek liquidity and optimize lower latency to our external venues,” he said. There’s also a plan to expand into options next year on the back of equities, he said.
In addition to lower latency, colocating the LX matching engine in a central data center facility will make it faster for clients to connect and tie into other markets and cross connect with other execution venues, related Libby. Also, the time to go live will be significantly reduced and the technology in the Savvis data center will be more advanced, which clients can use across their other strategies, said Libby.
In addition to collocation, Libby said Barclays is also looking to tap internal sources liquidity such as retail client flow, to provide a higher fill rate for its institutional clients. "I think there’s internal sources of liquidity that we can better integrate into our LX dark pool that are unique to Barclays and we’re in the process of doing that,” said Libby.
Currently, Barclays Capital’s crossing network aggregates liquidity from its global client base, market structure investments and internal trading desks. LX has experienced rapid volume and market share growth in the first half of 2010, with matched volume exceeding 100 million share per day.
Libby said Barclay’s goal is to increase volumes from every single client segment. “I think you’re going to see a much more aggressive messaging around this colocation effort to significantly go after new market share,” said Libby in the interview.
Libby said Barclays Capital would be going after some of these new client segments, but first it had to get the technology right. Libby, who previously worked at Goldman Sachs and helped build out Sigma X dark pools, joined Lehman Brothers four years ago. Under Barclays, he has been responsible for a lot of the overall liquidity strategy. He is looking at how the firm can bring these internal liquidity sources together and what it can do externally to accelerate that.
“As our clients become more advanced, our view is that we have to become more of a market ourselves where they come when they can’t find liquidity anywhere else,” said Libby.
A centerpiece of Barclay’s electronic trading strategy is to bring all of these liquidity flows together. To make that happen, Libby is willing to establish liquidity relationships with other sell side firms. “Firms are becoming much more willing to establish liquidity relationships with each other, versus a few years ago when there were selective partnerships,” said Libby. “A few firms are still holding the line to say you can’t come in. Our view is the more open liquidity across the brokers the better.”