The different operations of three of the main alternative trading systems have influenced their use by transition managers.
For example, E-Crossnet, owned by a dozen major investment houses, needs the orders to be crossed to be automatically submitted every half hour.
Posit, owned by ITG, runs up to six crosses a day. Both of these operations are used by State Street.
But Liquidnet, the newest to offer crossing in Europe, operates differently again. When investment firms sign onto the Liquidnet system, it gains access to their order flow and intelligently and dynamically fills the order, similar to a firms in-house order management system.
According to John Barker, Liquidnet’s managing director in London, it is this difference that gives LiquidNet a competitive edge.
“This means that users of LiquidNet are getting orders filled in real time and do not have to keep re-sending orders throughout the day,” he says.
Daniel Wiener, managing director at State Street in Europe, however, says this method of operation can have a downside. “If you put all your order flow into a crossing network, apart from possible adverse stock selection, there is a danger of information leakage.”
For the time being, State Street is adopting a wait-and-see attitude to LiquidNet and awaiting liquidity to build up in the relatively new system.
