Turquoise to Launch TQ Channel, Dark Pool Aggregation Service

Turquoise received regulatory approval from the UK’s Financial Services Authority (FSA) to launch a new service TQ Channel offering centralized, anonymous access to the non-displayed liquidity of a variety of providers. The new dark routing service to be launched in July will operate alongside Turquoise’s Pan European multilateral trading facility.

TQ Channel will accept incoming orders from clients, parse them through a series of algorithms, and pass the resulting orders to liquidity partners for execution, according to an update email from Turquoise CEO Eli Lederman. EuroCCP will centrally clear both sides of the transaction, thereby mitigating counterparty risk, which is a further benefit to users, stated Lederman in the email.

Citing trends in European market structure, including smaller trade sizes happening at higher frequency, Lederman wrote this has made the visible markets more difficult to navigate and “catalyzed the development of dark pools and various forms of internalization.” As these non-displayed pools of liquidity have become more important, institutional traders on the buy-and sell-sides have “clamored for access to this non-displayed liquidity, and for some intelligent design that re-aggregates it,” Lederman stated in the email update.

Turquoise also announced gains in its market share over the last two months following the expiration of its liquidity agreements with broker dealers in early March. “Our overall market share in the largest European markets is back to our earlier levels, and we’ve posted record results in growth areas like Spanish stocks,” wrote Lederman. Average dark order trading volume is up 50 percent since it began a midpoint reference price order book a month ago, the CEO reported. Users are gaining a four-to-eight point average price improvement on a daily basis, he added.

Lederman attributed the market share gains to three factors: bank and broker members posting greater amounts of their natural passive order flow, because they experienced higher fill rate; the addition of market making firms, who were attracted to its fill rates; and smart order routers recognizing Turquoise as a best execution venue.

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