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Navigate the Entire Market with
ISE Stock Exchange
With so many execution venues offering a variety of capabilities, ever wished you could be two places
at once? Or have access to the entire market through one exchange?
Andrew F. Brenner, head of the ISE Stock Exchange, New York, describes how this is possible on ISE’s
new equities platform, which offers a unique non-displayed pool of liquidity integrated with a fullydisplayed stock market.
Through an interview with Securities Industry News,
Brenner offers his perspective on trends in the securities
industry, what traders look for in a trading platform — and
how the ISE Stock Exchange can help traders get more than
they ever expected from an exchange:
Securities Industry News (SIN): What factors have the
greatest impact on today’s trading environment?
And how can traders position themselves to navigate
the markets effectively to succeed?
Brenner: The markets are in a state of rapid evolution. The
shifting landscape is partly attributable to Reg NMS, but
even more significant is the change being driven by industry
participants themselves — both the buy-side and the sellside. Not completely satisfied with existing trading
platforms, traders have zeroed in on three priorities: new
products, competitive pricing and speed.
First, traders want a differentiated product. The equities
market is crowded with too many places to trade 500 shares
of IBM or 1,000 shares of Microsoft and numerous crossing
NOT COMPLETELY SATISFIED WITH EXISTING
TRADING PLATFORMS, TRADERS HAVE ZEROED
IN ON THREE PRIORITIES: NEW PRODUCTS,
COMPETITIVE PRICING AND SPEED.
venues. However, traders are still looking for a platform that
can give them an edge, such as price improvement and the
ability to trade without market impact.
Second, execution venues have to be competitively
priced. With the number of exchanges, crossing venues, and
other alternative trading systems currently in the market,
traders pay close attention to competitive pricing.
Finally, traders want to tap as many hidden, non-displayed
pools of liquidity as possible in a short timeframe. Speed is
critical, and traders will only route orders to venues that can
deliver a very low-latency trading environment.
SIN: Given those three needs, what sets the ISE Stock
Exchange apart?
Brenner: ISE offers the only dual structure that integrates a
dark pool with a fully-displayed stock market. On one
platform, traders can have the best of both worlds — complete
order protection and continuous price improvement. With the
ISE Stock Exchange, they can navigate the entire market on a
competitively priced, low-latency exchange.
SIN: How does the exchange work? Do all orders
have access to both the non-displayed and displayed
pools of liquidity?
Brenner: Let me first describe both products, and then I’ll
provide you with an explanation of how they interact.
ISE’s MidPoint MatchTM is a fully automated,
instantaneous, and non-displayed platform for trading
equity securities at the exact midpoint price of the NBBO
(National Best Bid and Offer). This continuous execution
A Sponsored Supplement to Securities Industry News / Produced by SourceMedia’s Custom Marketing Group
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THROUGH ONE EXCHANGE, TRADERS CAN ACCESS
BOTH DISPLAYED AND NON-DISPLAYED POOLS
OF LIQUIDITY. THIS STRUCTURE PROVIDES AN
process provides seamless interaction for automated
trading systems, making the system highly attractive for
algorithmic and program trading. Within MidPoint
Match, quotes are never displayed and there are no manual
trade negotiations or waiting periods for crosses to occur.
Since trades take place at the midpoint, orders always have
the opportunity to be executed with price improvement.
In addition, ISE has integrated MidPoint Match into a
fully displayed market on the same platform. The full
complement of 7,000+ National Market System common
stocks and ETFs that are listed on the NYSE, NASDAQ,
and Amex will be traded on the ISE Stock Exchange.
Through one exchange, traders can now access both
displayed and non-displayed pools of liquidity. This
structure provides an unprecedented level of flexibility and
functionality for traders. Displayed market orders sent to
the ISE Stock Exchange will first receive the added benefit
of exposure to the MidPoint Match order book, ensuring
the possibility for price improvement. This interaction
between the two markets provides an opportunity to
maximize execution quality via access to both liquidity
pools. The ISE Stock Exchange is the first and only
exchange-sponsored continuous crossing venue that
provides this type of order interaction.
SIN: What advantages does a stock exchange platform
offer over other crossing or matching venues?
Brenner: As part of a registered exchange, the ISE Stock
Exchange operates under clearly defined SEC rules. This
makes the exchange a neutral and completely nondiscriminatory gathering place for buyers and sellers.
Broker-dealers can send transactions to ISE and have
confidence in order execution.
SIN: Do you anticipate that Reg NMS will change the
competitive landscape for the equities market? Will
there be additional advantages for an exchange in a
Reg NMS environment?
UNPRECEDENTED LEVEL OF FLEXIBILITY AND
FUNCTIONALITY FOR TRADERS.
Brenner: From our perspective, Reg NMS creates a level
playing field since it will ensure that any order placed on an
electronic exchange will be treated equally. As a result, there
will be price protection against trade-throughs. The markets
will become even more competitive and some of the business
being carried out on the New York Stock Exchange and the
NASDAQ will be spread out among other exchanges as
brokers look to access all sources of liquidity and maximize
the choices available for carrying out their trading strategies
and ensuring best execution.
SIN: Algorithmic trading seems to be a dominant
focus in the equity world. How does the ISE Stock
Exchange see itself within this space?
Brenner: With algorithmic trading, traders use complex
computer programs to evaluate the market and send
targeted orders, again with the goal of minimizing market
impact. The ISE Stock Exchange is particularly well-suited
for algorithmic order flow because MidPoint Match offers
a continuous cross and simultaneous integration with the
displayed market.
SIN: What does the future hold for Exchanges?
Brenner: Clearly, the exchange space has become more
competitive. ISE has always believed that competition is
good for investors because it tightens spreads and lowers
costs. And, of course, competition creates opportunities for
innovation. The ISE Stock Exchange has seized the
opportunity to create an exchange platform that offers a
high-speed and differentiated product that is competitively
priced. Traders are demanding more from exchanges. We do
not want to merely meet their expectations — we want to
exceed them. We want to give traders the best of all worlds
and the ability to trade smarter at ISE.
SOLICITATION OF INTEREST (SOI) ORDERS
Solicitation of Interest (SOI) is a MidPoint Match (MPM) order type that provides traders with additional
functionality. When selecting this order type, a broadcast message of the ticker symbol is disseminated to market
participants to elicit MPM order responses. Since MPM is a non-displayed marketplace, no other information about
SOI orders is divulged.
Key Features of SOIs
N Must be executable at the NBBO midpoint upon arrival
N Minimum order size of 2,000 shares
N Non-cancellable for a minimum of 5 seconds
N Serves as a trigger mechanism to generate
algorithmic responses
Benefits of SOIs
N Creates additional order flow in names being traded
N Receives elevated execution priority over other
order types for a 10-second time period
A Sponsored Supplement to Securities Industry News / Produced by SourceMedia’s Custom Marketing Group
CONTACT:
For more information about the
ISE Stock Exchange, visit
www.isestock.com.
Tel: (800) 518-7360
Email: [email protected].