ITG to Deploy European Continuous Cross

NEW YORK—Agency broker-dealer and block-crossing network provider Investment Technology Group (ITG) plans to launch a European version of its continuous crossing network, Posit Now, on Feb. 14, ITG officials tell DWT.

"We're going through a lot of testing now and we're going through a lot of environments here, but we are getting more and more comfortable closer to the launch date," says Alasdair Haynes, managing director and CEO of international operations with ITG. "It's our Valentine's Day present to the world," he says, referring to the platform's launch date.

Traders will be able to access Posit Now via a FIX connection from their order or execution management systems (OMSes or EMSes). The ATS currently supports up to version 4.4 of the FIX protocol.

"Every EMS and OMS in Europe today has that capability to communicate via FIX," says Haynes. "It may be a different version, but we will support them all in order to get the orders into the platform," he says.

This deployment represents the current phase of ITG's product migration for its block-crossing offerings, which consist of Posit Match, Posit Now and BlockAlert, from the U.S. to the European markets.

ITG's fixed-time crossing engine, Posit Match, has been operating in the European market since 1998, says an ITG spokesperson.

The European version of Posit Now, which originally debuted in August 2005 in the U.S., uses the same underlying technology as its U.S. counterpart.

Although the original matching algorithm was designed in a Unix environment, the current version runs in a Microsoft Windows environment, says Haynes, who says the Posit platform is more than just the matching algorithm.

"As we globalize the product, it's slightly adapted and changed for the local markets," Haynes says.

The European version of Posit Now will support 9,000 equities across 15 different European markets, which means the platforms must support multi-currency, local order types and settlement processes.

"The obvious thing here is that in the U.S. markets, people charge in cents per share," says Haynes. "In the European markets, and most global markets, trades are charged on an ad-valorem basis, or a percentage of the market value."

To address these differences, ITG tweaked the algorithm it uses to address each market's individual requirements.

"The principle and basic core technology are the same," he says.

However, the matching algorithm is only one part of the solution, Haynes says. "The most important part of the solution is the routing network," he says. "It is important to be able to get that information, make the connection, and get it back to the customer via their OMS or EMS."

Since Posit Now trades occur at the midpoint of the current market quote, Haynes says ITG has not had the same difficulties rolling out its alternative trading system (ATS) as other firms have had, such as Instinet's Chi-X (DWT, Sept. 4, 2006).

"Posit Now is a continuous cross, but it doesn't provide any price discovery," says Haynes. "We are not trying to set up an exchange; we're trying to match our clients' orders as efficiently as possible."

Without a price discovery mechanism, the ATS does not have to report its non-existent quotes to the local trade reporting facility, nor does ITG face similar trade clearing issues.

"We settle like any other broker-dealer within Europe," says Haynes. "In the U.K., we will settle through Crest and in Europe we will settle through Euroclear or another clearinghouse."

ITG does not plan to deploy a global Posit Now engine, but instead will run the U.S. and European versions of Posit Now in parallel.

"Clients could access both of them through two FIX connections from their EMSes," Haynes says.

After the platform goes live, ITG will also go live with the ITG algorithmic trading suite.

"Our clients can submit orders via their OMSes or they can call up and ask people to put the order in from the desk," he says.

Over time, ITG will allow clients to place orders through direct market access connections to Posit Now.

"Our objective here is to launch an identical set of U.S. products and globalize the ITG product suite," says Haynes.

Haynes says ITG is looking to roll out Posit Now in Asia and Japan, but the European market comes first. "Our plate is pretty full at the moment," he says.