A buyside-only dark pool launched last year by Charles River Brokerage is expanding with new clients and staff, according to the company.
Charles River, known for its order management system, started an equities crossing network called CReX last September with a staff of about 15. Its first group of users consisted of a handful of OMS clients. Now the pool has more than 50 buyside participants, and the firm has 25 employees dedicated to CReX.
“Not only have we had steady growth in participants, but also we’ve seen volumes go up as well, so it’s been pretty steady since day one,” said Frank Matarese, director of brokerage operations at Charles River.
Matarese declined to disclose trading volume in the dark pool, citing client sensitivity. Nor did he disclose the average trade size, except to say that it is larger than the industry average.
The firm is entering a mature business that features long-standing players in the buyside-only crossing space. Liquidnet, which is a global network, has been around for a decade and boasted 637 clients at the end of last year, according to its Web site. ITG’s Posit was launched in 1987 and now serves markets in the U.S., Canada, Europe and Asia/Pacific.
One industry insider contacted by Traders Magazine said it was good that CReX minimizes the opportunity for information leakage. But as it’s hard to get a critical mass of liquidity in a dark pool, CReX is likely to remain a niche venue, he said.
CReX is integrated with the order and execution management systems on the Charles River platform, which Matrese said makes things easier for traders, allowing them to trade with fewer clicks of the mouse.
Since CReX is integrated into the Charles River OMS, traders looking to commit an order to a third party venue can also check to see whether or not there is a liquidity opportunity in the dark pool. That gives traders the flexibility to pull out a piece of their order and attempt to execute it within CReX.
Traders can also use several third-party platforms with the dark pool, and Charles River is currently working to expand access to even more platforms.
According to Matarese, many on the buyside are still concerned about high-frequency traders trying to take advantage of them. By shutting out the sellside, CReX misses out on some liquidity, but it also allows clients to trade larger blocks of shares without having to slice them up and use complicated algos.
Algos definitely have their place in the market, but they tend to be easier to use with extremely liquid stocks, Matarese said.
“Stuff that’s really thinly traded, that’s where a dark pool comes in, because you can get a block done with minimal impact,” Matarese said. “At the end of the day, you’re giving the trader a series of tools that they can choose from.”
Matarese said traders want choices, and CReX is part of an effort to give them a maximum amount of flexibility. One of the next steps for Charles River will be to offer clients more tools for analytics decision making, he added.
