Sean Hoover

The offering – already available in the US and Canada – will give clients access to EU shares on Nasdaq Europe. 

Speaking to the TRADE earlier this year, Sean Hoover, PureStream chief operating officer, said: “Subscribers and clients have both made it clear that the unique value of streaming in the US is something that they would welcome in Europe.

“We are excited about our partnership with Nasdaq, who has publicly announced its intent to roll out our streaming order types in Europe later this year, subject to the necessary approvals.”

Specifically, PureStream enables access to latent algorithmic liquidity using liquidity transfer rates – all in line with the volume goal of each strategy. 

Currently, Nasdaq is the only venue in Europe offering this. There has been a lot of discussion surrounding the race for first mover advantage in Europe’s emerging crossing network landscape in recent times.  Despite low European volumes, these venues offer increased choice and competition for institutional investors looking to achieve more effective outcomes.

Several European exchanges are underway with plans to bring out offerings of this ilk throughout the course of the year, The TRADE understands, while some other US alternative trading systems (ATS) – as well as PureStream – are also preparing to make the crossing over the Atlantic.

Within Europe there have been some significant moves rumoured. Talk of Aquis launching a new TWAP and VWAP trajectory crossing capability this year has been widespread, while Cboe has confirmed plans for the launch of its new volume weighted average price (VWAP) crossing service for equities at the end of this year.

Read more: Cboe BIDS VWAP-X: Introducing venue-based trajectory crossing to Europe

The tool uses open-ended liquidity transfer rates to substantially improve the process of price and liquidity discovery – minimising institutional investors’ market impact. 

PureStream’s solution is aimed at helping both the buy- and sell-side when executing long-term trajectory orders – pairing trading interests in open-ended streaming batches, meaning traders do not need to rely only on sourcing liquidity on a single point-in-time basis. 

Read more: PureStream: The disruptor venue determined to make waves in the institutional liquidity landscape

Nikolaj Kosakewitsch, senior vice president and head of European equities and derivatives at Nasdaq, said: “This launch underscores our commitment to offering world-class platforms that support the evolving needs of the global capital markets. PureStream on Nasdaq Europe will provide greater choice of trade execution mechanisms to our clients and help institutional investors navigate the European trading landscape.”

The post Nasdaq to launch PureStream in Europe early next year appeared first on The TRADE.

Several European exchanges are well underway with plans to bring out offerings of this ilk in the next few months The TRADE understands, while a handful of US alternative trading systems (ATS) are also preparing to make the crossing over to the Bloc to replicate the progress they have achieved in the US.

However, in light of notably low volumes and high levels of existing fragmentation, Europe now finds herself as the belle of the ball – she’s in high demand but there’s limited room on her dance card.

Innovation is, of course, always welcome and a central solution to Europe’s somewhat stunted markets – when compared with others around the world. And these venues’ approach to workflows have been hailed by institutional investors as a more stable means for institutions to get execution and remove adverse selection outside of the existing periodic auction function that has already seen success in Europe.

It is rare, for example, that you’ll find an asset manager worrying about the good of the market or how an order might influence the primary lit market share, over whether or not they have achieved the optimal outcome for their portfolio manager and end investor.

But while these players each have a niche and positive offering to bring to Europe, there will likely not be room for all of these contenders to gain meaningful traction. The real question is who will achieve first mover advantage?

A Flathead vs Philips screwdriver

The US players eager to make their debut in the pan-European markets, each bring a slightly different spin to their approach to matching trades. Each have seen success in the US, and so one can see how a move to Europe feels like a logical next step. Many of them also have Tier 1 backing which could be leveraged to gain traction with European counterparts in the future.

Eric Stockland, co-head of global electronic trading at BMO Capital Markets, explains that the venues largely fall into two categories: “It’s like a Phillips screwdriver and a Flathead screwdriver. They’re built for slightly different purposes.”

Those taking a more micro periodic auction approach include OneChronos and IntelligentCross. When trading on these venues in the US, you trade everything you’ve got at a single point in time.

IntelligentCross uses artificial intelligence to run a periodic auction model instead of traditional matching engine technology. The ATS offers both dark and lit liquidity, using machine learning to optimise price discovery.

It claims to match orders “near continuously” to achieve optimal price stability. It added intraday optimisation earlier this month – effectively allowing its midpoint matching capabilities to adapt in response to market conditions during the live trading day.

“Investors should not have to choose between liquidity and performance,” Roman Ginis, founder and chief executive of Imperative Execution, tells The TRADE. “We are always looking for ways to deliver scale and yet still minimise adverse selection and market impact.”

Alternative ATS’ that favour a trajectory crossing model include LeveL ATS, of which Nasdaq took a minority stake in 2021, PureStream (powered by Nasdaq) and Morgan Stanley’s ATS TrajectoryCrossing. Using these systems, you trade either at a rate or an average which ranges in duration.

Read more – PureStream: The disruptor venue determined to make waves in the institutional liquidity landscape

“The trajectory cross models are really important for clients whose algorithms are benchmarked to an average price over time for example like a VWAP algorithm,” explains Stockland.

“If you need to get VWAP for 100 shares or for $10,000, it’s really hard to do because you can only do that in a couple of trades. If you think of a really actively traded stock you might only get to sample price two or three times. It’s very hard to get the average but if you agree a priority to trade at an average price over some period of time you can exactly get the average.”

While not all of these venues’ moves to Europe are confirmed, PureStream and IntelligentCross are rumoured to be exploring opportunities in the region, The TRADE understands.

“Subscribers and clients have both made it clear that the unique value of Streaming in the US is something that they would welcome in Europe,” PureStream chief operating officer Sean Hoover told the TRADE. “We are excited about our partnership with Nasdaq, who has publicly announced its intent to roll out our streaming order types in Europe later this year, subject to the necessary approvals.”

A spokesperson for IntelligentCross told The TRADE it was open to European opportunities in the future but declined to comment on timelines.

Others such as OneChronos are much further along and are in the process of gaining regulatory approvals to launch in Europe and the UK. The TRADE broke the news in January that former LSEG’s Scott Bradley had been appointed chief executive officer of OneChronos’ London office, effective immediately. Alongside him, former SIX’s Adam Sherlock was appointed chief executive of the European office and head of the firm’s new European Amsterdam based MTF, effective from 1 April.

Due to launch following regulatory approval in H1 2025, the US ATS proclaims to leave speed out of the equation unlike the price time priority of existing periodic auction models. Instead, it takes dollar price improvement as its priority function.

“We are taking time as a discrete function, which is what you do when you use a periodic auction rather than continuous mechanism,” explains Bradley. “We allow market participants and their clients to compete directly on price and quantity by removing speed as a factor in execution quality, levelling the playing field for all investors.”

The ATS runs auctions roughly 10-15 times per second and then uses series of order collection, data buffer, and optimisation models. Auctions run concurrently across the universe of securities as opposed to independently timed single security auctions.

On the basis of this model, the ATS is therefore set to add ‘expressive bidding’ otherwise known as contingent trading to its arsenal in the US in the coming months. However, expansion plans for Europe will be focused on its core optimisation model for the time being, pending regulatory approval.

“You’re not treating each security in a totally isolated manner. You could for example manage a pairs trade through a periodic auction because you’re actually trading those securities at the same time,” adds Bradley.

“That is functionality launching this year in the US and so will become something available in Europe over time, however we are not looking to run before we can walk. What we are initially looking to launch in Europe will be more akin to the model in the US as it is currently today.”

The American dream

These venues have achieved success in the US and each bring innovative industry solutions to the table, however, with expansion plans brewing, the challenge now lies in gaining meaningful traction in Europe when the pie itself is not growing. Europe is not the US and achieving a 1% market share here is not akin to achieving it there.

Europe’s venue landscape is already one of the most fragmented in the world. Meanwhile rhetoric from regulators, particularly in mainland Europe, continues to encourage a push for greater volumes taking place in the lit continuous markets.

We don’t have a consolidated tape – if this is news to you then see me at the end of class – and this means for the time being any new venue looking to launch in Europe will not benefit from CT revenues. This marks a stark difference from the US where every lit venue or exchange receives a portion of revenue thanks to the best execution rule.

The elephant in the room: budget. Nothing comes for free and in pan-European markets, no one is obliged to connect to any venue. Brokers – particularly smaller ones – are continuously facing the conundrum of how to leverage new and innovation solutions brought to market while managing their technology spend.

Some are more fortunate than others in this department but for those who are not, they will simply not have the capacity to build out to all of these venues, and if they do, they risk spreading themselves too thinly across a myriad of options.

With this in mind, many could therefore take the stance that they should hang back until one or a few clear winners rise above the rest and become a fast follower. However, if all take this stance, then nothing will gain meaningful-enough traction to survive.

There is of course the option for brokers to connect to technology and OMS providers who do this connecting work on their behalf. They take in the quotes and data feeds and brokers can simply send a conditional order and look at prices. But again, this relies on said technology provider putting up the cash to build out to any or all of these new venues.

European exchanges

Enter Aquis and Cboe. While many European institutional investors are looking to the US for this much-desired trajectory crossing and upgraded periodic technology, there are developments rumoured to be taking place closer to home.

According to a source familiar with the matter, Aquis is rumoured to be launching a new TWAP and VWAP trajectory crossing capability towards the end of this year. Aquis declined to comment on the launch. Meanwhile, Cboe is also rumoured to have a crossing launch in the pipeline.

“The benefit that we have with new services is our long track record of success with orderbook innovation, and closely partnering with clients during the development process,” Natan Tiefenbrun, president of North American and European equities at Cboe, tells The TRADE.

“We deliver new services that clients want, on time and we make it as easy as possible from a technology perspective for these services to be adopted. We have built up a strong level of trust and support from clients which is a real source of competitive advantage to us when it comes to new product launches.”

When asked to comment on any new services in the pipeline, Cboe declined to comment.

While these offerings will not be a carbon copy of what the US ATS’ intend to bring over, one can see the appeal of leveraging an existing connection with an exchange partner to access said technology instead of having to fork out for new ones.

With all of these players now vying for the attention of institutional investors, it is likely that the early bird will catch the worm and some newer players may struggle to make inroads. Players such as OneChronos are expected to arrive in Europe in 2025 but with European players preparing to throw their hat into the ring before that, we could see a chunk of flow hoovered up before their boots touch the ground.

Cboe’s periodic auction is the beneficiary of said tactics and now dominates the market in Europe. April was an all-time record for Cboe’s periodic auctions across both average daily volume at just over £2.1 billion and market share which accounted for 6.3% of total continuous trading in European equities.

“Undeniably there’s an advantage to being first but that advantage is not insurmountable,” says Stockland. “The folks could come in and quote that slightly novel improved twist on the workflow. Workflow really matters in this business. It could come in and compete better on price.”

“It’s a big advantage to going first but I don’t think it will thwart others and it doesn’t preclude them from ultimately overtaking and becoming number one. Look at Cboe, they were upstart ATS 15/20 years ago and they dominate pan-European trading today.”

Private rooms

An interesting element of the US players is their capabilities with ‘private’ or ‘hosted’ rooms and whether or not this could be translated into their potential future European workflow. In the US, the use of private rooms – a not too distant cousin of Europe’s former Broker Crossing Networks (BCNs) – is prevalent amongst institutional players.

The option is available to participants who do not have the budget or technological or regulatory capability to run a venue but that are looking to interact with select number of firms. IntelligentCross runs this functionality and OneChronos is about to launch it in the US, The TRADE understands.

OneChronos’ offering is called Nexus and allows clients to create bespoke periodic auctions to trade with a select number of counterparties.

Fragmented liquidity has become a hot topic in European discussions and sparked some heated on-stage debate at recent conferences. BCNs were scrapped as part of Mifid II in order to make markets more compliant and push more volumes onto lit continuous markets.

However, increasingly bilateral and fragmented forms of interaction are becoming more popular in Europe despite rhetoric around the damaging impact they have on the primary markets. It’s an interesting one to watch, especially considering the potential for any venues that operate using this model to move over to Europe.

“There may be certain features which may be able to find their way into the European landscape,” says Bradley. 

“If you think about the trading that happens within SIs currently, there’s clearly an appetite for certain forms of bilateral execution but a straight translation from ATS private room into MTF would not meet regulatory requirements as is. What it does suggest is that there is an appetite to think about new dynamics of counterparty interaction.”

The landscape of periodic auction and trajectory crossing networks in Europe is set to flourish over the coming remainder of the year. Despite Europe’s volumes being low, these venues offer greater choice and competition for institutional investors looking to achieve optimal outcomes which could in itself go some way to boosting stats in Europe. While not all will be successful, some definitely will. In this instance, it’s likely the one that takes top spot will be the one that gets there first. Innovation will prevail.

The post Early bird catches the worm: A look at the race for first mover advantage in Europe’s emerging crossing network landscape appeared first on The TRADE.

Armando Diaz, chief executive of PureStream

The ATS claims to provide brokers and their institutional clients with improved bandwidth in order to access liquidity faster, more cost-effectively and with greater security.

At the time of the launch, PureStream claimed to enable institutional investors to execute up to 40 times faster without price impact on their portfolio implementations.

In Q3 2023, PureStream recorded 40,065,204 total trades up from 11,301,567 in the same period last year – marking a 254.51% increase year-on-year and showing significant promise for the ATS.

Two years since its go live date, The TRADE caught up with Armando Diaz, chief executive of PureStream, who noted that the electronification of equity markets has negatively impacted a trader’s ability to match directly with other institutional liquidity.

“When you think about the evolution, electronic trading originated as an aid to the trader – it wasn’t meant to replace people, it was an efficiency tool to automate the smaller orders,” highlighted Diaz.

“As a result of that, a mechanism for algorithms that complimented block trading was never created. There were no safe and efficient ways for an algorithm to indicate it has more or could do more. At PureStream, we invented the streaming block to address this gap, and improve direct matches between institutions that increase the bandwidth of liquidity transfer amongst liquidity seeking institutions.”

The ATS has gained support from across the street since its inception. In 2021, it received significant backing in a funding round led by Goldman Sachs, Nasdaq Ventures and Bank of America.

The funding was used to help support the launch of the ATS, while Nasdaq’s execution platform was later chosen to power the platform.

“We’ve all been used to sourcing on a point-in-time basis. PureStream has been one of the more disruptive ideas to the equities market structure that the market has seen in quite some time. The venue has helped to reduce signalling risk and drive better execution efficiency across our algos,” Pankil Patel, global head of electronic trading at Bank of America, told The TRADE.

“We were excited by the thought of how we could integrate this solution into our algos and ultimately what we thought would be a great improvement to the overall results of what we’re trying to achieve for our clients.”

PureStream uses percentage rate-based order types to match orders. The matched orders percentage rate is then applied to each of the stocks subsequent trade reported to the consolidated tape to create a stream of trades. This provides traders with an alternative to discovering prices purely from the national best bid and offer quote.

PureStream’s business model is described simply by the firm: Match with compatible liquidity. No selling data. No market makers. No payment for order flow.

“From an algo practitioner standpoint, we have leveraged this platform in a lot of different ways, across our different algorithms, to improve the performance for our clients,” added Bank of America’s Patel, speaking to The TRADE. “As it continues to grow, it becomes a source of liquidity that we’re finding other interesting ways to leverage.”

PureStream is exclusively available to broker dealers and does not connect directly with the buy-side. However, Diaz points out that “based on the orders that we’ve seen from our subscribers and our collective experience on the sell-side, we believe our order flow is from large institutional liquidity seekers.”

The largest use case of the platform is described by Diaz as a broker dealer algorithmic platform’s integrating streaming to improve their performance on their algo strategies that they provide the buy-side.

“Before streaming there was no way for algorithms with different strategies to match at the parent level,” added Diaz, speaking to The TRADE. “They’re each on a 1-way trip into the market and the market makers, and we are now creating a way or a language or a protocol where algorithms can match once, achieve their strategy better and never have to send any orders out because they’re in an open-ended batch with another algo.”

In terms of future expansion, the platform plans to explore the retail sphere with new order types and launches. While PureStream’s core service targets institutions, Diaz confirmed that retail investors are by no means excluded from its current offering. Institutions do, however, tend to be more able to meet the system’s high minimum order size requirement.

And given that retail orders and the continuous market today have unique market structure, streaming may not necessarily be a huge attraction for retail participants already able to get a price better than the national best bid and offer (NBBO).

“In the future, we will have order types that will address some of the pain points for retail trading,” Diaz emphasised. “Although institutional will always be our core, we would like to compete in that segment, or at least, have an opportunity for orders at PureStream to interact with retail orders. This would create a market that is more representative of all the market participants.”

The post PureStream: The disruptor venue determined to make waves in the institutional liquidity landscape appeared first on The TRADE.

The Nasdaq Execution Platform will fully host the PureStream ATS, which is expected to launch in the second quarter of this year, including system operations management, risk controls, venue surveillance, trade reporting, and clearing facilitation.

PureStream claims its ATS will allow institutional investors to execute transactions up to 40 times faster without price impact on their portfolio implementations. 

It uses percentage rate-based order types to govern matches and allows traders to discover prices using market trade reports from the consolidated tape instead of purely from the national best bid and offer a quote.

The news follows a recent Series A funding round where PureStream raised $14 million from major market participants including Goldman Sachs, Bank of America, and AllianceBernstein. Nasdaq Ventures also participated in the funding round.

“By changing the basis of a match and virtualising price discovery, PureStream’s unique business model is enabling algorithmic orders to search, find, and yield more liquidity faster without price impact,” said Valerie Bannert Thurner, SVP and head of the buy-side and sell-side solutions for market technology at Nasdaq. 

“In partnering with Nasdaq, PureStream will seamlessly leverage our market operating experience and technological scale to effectively manage its internal marketplace, further reduce expenses, and provide opportunity for more revenue generating activities as it launches its innovative market.”

The end-to-end execution technology by Nasdaq powers over 2,300 companies in 50 countries, including capital markets infrastructure operators, market participants, banks and regulators.

“Our vision for creating this new institutional trading venue would not have been possible without our partnership with Nasdaq and leveraging its industry-leading market technology,” added Armando Diaz, CEO, PureStream Trading Technologies. “As we launch our endeavour, time to market, infrastructure reliability, and scalability are critical components for success.”

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