Agency brokerage EdgeTrade has introduced an algorithm for directing orders only to dark pools of liquidity; it is called Covert and is an extension of EdgeTrade’s FAN (find and nail) smart order execution strategy.
Covert is a tool designed for institutional traders to capitalise on the benefits of sending electronic orders to dark pools only – particularly when the potential for negative exposure is of paramount importance.
Joseph Wald, CEO of EdgeTrade, says: "In the past, ‘upstairs’ liquidity was difficult to directly access and interaction with it was often cumbersome, not transparent and invited unwanted exposure. Covert brings dark pool connectivity to the fingertips of traders and, perhaps more importantly, keeps a lid on information leakage."
EdgeTrade reported that in April FAN saw a 28.9 average daily (year-to-date) percentage of its executions in the dark, with peak days hitting as much as 66%.
The FAN execution strategy simultaneously sprays aggregated dark pools and public markets, and then continuously moves an order in line with shifting liquidity until best execution is fulfilled.
Since its launch in September 2006, FAN has acquired an extensive user base of clients on the buyside and sellside, from large pension plans and hedge funds to global investment banks, broker dealers and alternative trading systems.
Wald says: “What we have witnessed this year with respect to volume of executions taking place in the dark is nothing short of spectacular."