Waters Rankings 2017: Best Crossing Network—Instinet

Instinet powers to the front of the Rankings with its VWAP Cross offering

Waters Rankings 2017 - Best Crossing Network - Instinet
Brian Cashin

Sourcing liquidity continues to be one of the extant challenges for market participants today, despite the proliferation of trading venues that began in the early years of the millennium. This becomes even more of a concern when executing large-in-size or block orders, although market operators have been keen to produce solutions in this area. One of the most successful has been Nomura-owned Instinet’s Volume-Weighted Average Price (VWAP) Cross network.

“Finding block liquidity in a low-volatility environment is very important for our institutional clients,” says Gerry Milligan, head of program trading and electronic trading services for the Americas at Instinet. “Historically, most of our VWAP Cross participants were VWAP benchmark-sensitive clients, however we’ve seen more clients participate in the VWAP Cross purely as a source of liquidity, especially in challenging liquidity names that are harder to trade—notably in the small-cap space.”

Instinet’s VWAP Cross network provides an anonymous venue to execute block transactions during a series of pre-market matches—in the US, these are held at 8:35, 8:50 and 9:15 a.m., with fills receiving a consolidated full day VWAP at around 4:10 p.m. The firm has continued to enhance its processes in this area throughout the year, as Milligan explains.

“The pre-market VWAP Cross has had tremendous success this year as clients continue to look for ways to interact with natural block liquidity in an anonymous fashion to help mitigate their benchmark risk,” he says. “We’ve worked on fine-tuning our distribution to clients, which includes one-touch access to the VWAP Cross via our Algo platform where orders run through all three pre-market VWAP Cross matches with any residual quantity immediately rolling into an Algo Strategy.”

Further investment has come from other areas, including acquisitions from rivals. In late June 2017, Instinet announced that it had agreed to purchase the BlockCross alternative trading system from State Street. The transaction is still pending, but Milligan believes it will add substantive capabilities to Instinet’s global networks.

“This adds a new permutation of blotter integration and conditional interaction that our clients can access via our various distribution channels,” he explains. “It allows us to offer crossing opportunities to a broader set of clients, tap Instinet’s existing technology capabilities and become more seamlessly integrated into clients’ workflows. In addition, we anticipate BlockCross to be highly complementary to our commission-sharing agreement and execution management system platforms.” 

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