NYSE and Bids Launch Platform for Block Trades
January 30, 2009
The New York Block Exchange (NYBX), a joint venture of NYSE Euronext and block trading platform Bids Trading, began operations Jan. 29, about six months later than initially anticipated.
The venue, which received Securities and Exchange Commission approval three days earlier, is touted as the first to allow dark orders to interact anonymously with displayed and reserve liquidity from the NYSE Hybrid Market. Bids and NYSE Euronext--which invested in Bids in October 2006--each hold a 50 percent share of NYBX, which will operate as a facility of the New York Stock Exchange.
In an interview, Tim Mahoney, CEO of BIDS Trading, said that NYBX brings together the reserve, displayed and dark markets, aggregating all the liquidity and creating blocks at various price points. What distinguishes NYBX from competitors, he said, is that we allow both the buy and sell side into our system It is attempting to solve the block trading problem, but its done it in a very unique way.
Larry Leibowitz, group EVP and head of U.S. execution and global technology at NYSE Euronext, noted that given the speed and complexity of todays dynamic marketplace, there is a need to resolve the problems inherent in executing block trades in an increasingly fragmented trading environment. NYBX will significantly reduce market fragmentation for large orders, electronically replicating traditional block trading.
The introduction of NYBX reflects the growing competition for order flow among the exchanges and banks, said Michael Henry, senior executive in Accentures capital markets practice. As banks increasingly turn to fee income for revenues, dark pools are becoming more and more important to their business models. In turn, exchanges are looking to match the trading innovations of banks in order to retain liquidity.
In response to the long-awaited announcement--Bids and NYSE first unveiled their plans in October 2007--a spokesperson for Liquidnet, a buy-side-only venue for block orders, said the launch speaks to the larger need for an institutional marketplace where trades of very large size can be executed in blocks with other institutional investors and with minimum price disruption. That is what we have built and it looks like the industry is headed that way.
There has been a gap in electronically servicing block trades, added Mahoney in a prepared statement. We see NYBX as the most efficient trading solution, he said. By combining the anonymity, speed and flexibility of the BIDS ATS with the worlds leading exchange, NYBX aims to improve block executions, provide unparalleled price discovery and reduce fragmentation, giving traders a one-stop block trading service.
NYBX is open to all New York Stock Exchange members and Bids subscribers via sponsored access. Bids says it enables access to the new venue by allowing subscribers to opt in on an order-by-order basis--traders can set different prices and minimum trade sizes in each venue.