Barclays Capital has launched an algorithmic trading feature in the US 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.
Barclays DirectEx was first launched in 2012 as the firm’s first actionable IOI platform for both natural and non-natural 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.
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’ algorithms, 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.
“We believe DirectEx is a unique liquidity source because of the way it bridges the divide between our electronic and high-touch clients,” says Joe Mecane (pictured), head of equities electronic trading. “The evolving distinction between low-touch and high-touch trading is leading not only to innovation in liquidity solutions, such as DirectEx and automated capital commitment, but also in coverage models. We find that clients are increasingly comfortable with controlled visibility of their interest, if it means finding liquidity.”