Global agency broker Bloomberg Tradebook has launched OPTX, an agency execution platform that uses quantitative data models and analytics to route orders.
The launch is a response to what Glenn Lesko, CEO and president of Bloomberg Tradebook, calls “the dynamic nature of the marketplace.” The increased complexity and sophistication of the market presents challenges for buy-side traders who use agency brokers. Those challenges, Lesko says, are the sheer number of algorithmic trading venues traders must consider, the way that passive management strategies are overtaking active management strategies in their performance, and the impact of regulation, especially MiFID II.
“Passive management is always focused deeply on implicit trading costs and alpha preservation,” says Lesko. “Many are just trying to mimic the index so any slippage in implicit trading costs will really be harmful. That’s moving to the active management side also because many are underperforming — by a small margin — so the relevance of managing the implicit cost of trading has never been as important to their own futures as it is now. They must manage their implicit trading costs to continue to gather assets and maintain margins from their clients.”
At the same time, MiFID II regulation will hold buy-side traders accountable for getting best execution. Achieving that requires a process for sorting through trading venue offerings, as well, Lesko says.
OPTX represents a change from Bloomberg Tradebook’s previous approach to best execution, by adding a unique optimiser, according to Lesko. “We send the order to what we believe — what our logic and quant program believes — will give the best performance for that particular order on that particular day, with those particular characteristics,” he says. “Then we can switch within the day if the performance changes or if the market changes.”
The consistency of Bloomberg Tradebook’s agency brokerage delivery over the past 20 years, the reputation of Bloomberg’s data and analytics, and Bloomberg’s position that facilitates connectivity between buy and sell side firms all help strengthen the OPTX platform, Lesko says. OPTX also includes previously available proprietary Bloomberg liquidity-seeking capabilities such as B-Dark, B-Smart and ETF RFQ, and its portfolio algorithm and PAIR platform.
The OPTX platform is available for Bloomberg Tradebook equity and options offerings in the US, including benchmark algorithms such as VWAP, percentages of volume, market open and market close, and implementation shortfall. The company plans to expand the platform globally, according to Lesko.