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Plagued by inefficient and/or exploitive execution of your trades?
BarterSecurities allows you to package orders so you have
- reduced market impact,
- less execution risk, and
- increased liquidity for your trades.
BarterSecurities lets institutional traders package orders so that
marketmakers want to compete aggressively to execute them. The
BarterSecurities system is valuable for any institutional trader who
generates buy and sell orders (in different securities) at the same time.
Using the BarterSecurities system, traders deliver a buy order and a sell
order to be executed simultaneously in real-time (barter order). For
example, you might deliver a barter order to buy IBM and sell INTC in
roughly equal dollar amounts, each leg contingent on the other. Because the
two legs are offsetting, a marketmaker who takes the other side sustains
little overall market risk and/or hedging cost, and can afford to compete
more aggressively. This produces more favorable price responses to your
order. Moreover, since the market risk of the barter order is smaller than
for traditional orders, your order generates less market impact.
Pending limit orders that are internal to the system may provide execution
prices that are even more favorable for institutional traders. Many limit
orders may be combined to make one execution. For example, an order to sell
IBM and buy INTC, an order to sell INTC and buy CSCO, and an order to sell
CSCO and buy IBM, could form a three-way internal match. Likewise, if you
wish to sell CSCO and buy IBM, the system may find that a large circle of
barter orders ending in these two symbols creates a trading opportunity for
you that is more favorable than NBBO prices.
Soon, institutional traders will be able to use the BarterSecurities system
to send baskets of buy and sell orders simultaneously.
Because offsetting legs are executed simultaneously, you experience less
execution risk. For example, there is never a chance that your buy order is
filled in a falling market, while your compensating sell order is left
unexecuted. The time that you must spend monitoring orders is therefore
reduced. Furthermore, adverse selection against you is eliminated because
you never have to reveal limit prices for your orders. You can access a
Limit Order Book for each of your barter orders
and can trade against existing offers at the click of a mouse, often with
instantaneous confirmation.
BarterSecurities offers you more liquidity because it provides marketmakers
with a Toolkit to automate their tasks. Using the
toolkit, marketmakers can pre-set their responses to incoming barter orders
according to the risk characteristics of each order. For example, a
marketmaker could write a decision rule that offers to trade a barter order
for 90% of the current NBBO price spread, in the current NBBO size, whenever
the dollar sizes of the buy and sell legs are almost equal and the two
symbols are in the same industry. The system uses the rule to place on the
Limit Order Book an automatic response to your incoming barter order if it
has these characteristics.
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