The Boston Stock Exchange (BSE) has launched an automated-trading product to give the trading community instant access to BSE liquidity. The move is in response to the growth of program trading and algorithmic trading from the exchange's customers who want it to "produce quicker executions and focus on speed," says Marybeth Shay, BSE's senior vice president, sales and marketing.
The new product, known as Instant Liquidity Access (ILA), will offer customers an immediate execution against the BSE book when Boston is the national best bid or offer (NBBO) or equal to the NBBO on another market such as the New York Stock Exchange.
ILA was internally developed and "is an enhancement to our actual systems platform," says Yann L' Hullier, vice president of trading systems at BSE.
Even though Boston officials say that ILA was developed to support customers' program trading strategies, they concede that ILA will help position Boston as a fast market, as proposed under Reg NMS. "The BSE has been a hybrid market for many years and we are not waiting for the Reg NMS debate to shake out. We are responding to the demand from the marketplace for more 'fast market' options," states Mike Curran, chief executive officer at the BSE, in a release.
Shay says the concept of ILA was developed before the SEC's Reg NMS came out in February. " It plays into what is likely to shake out of Reg NMS," says Shay.
Here's how ILA works: Customers will designate their ILA orders with a unique order type to distinguish them from regular BSE orders. Right now there is a 1,000-share size-limit on ILA. Orders that do not execute will be canceled immediately. If the BSE quote is good for 1,000 shares, and a customer sends in a 1,200 share-ILA order, then 1,000 shares will execute and 200 shares will be cancelled, explains Shay. "We don't automatically take their balance and send it to the specialist," says Shay. "As we develop the product for program trading, that's the way our customers see it, they want to know that they are immediately canceled. If they are not filled they have the opportunity to put it back to the auction," she adds. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio