Goldman Sachs Electronic Trading’s new algorithm, BlockStrike, aims to help clients trade in block size in today’s fragmented marketplace.
BlockStrike places orders into dark pools seeking blocks while executing trades using Participate, volume-weighted average price and time-weighted average price strategies, said Greg Tusar, managing director and co-head of GSET. In conjunction with GSET’s Sonar and Sonar Dark algorithms, BlockStrike will convert dark orders into block-only dark orders. The product was officially released Feb. 1.
“In the past, traders had to decide whether to commit their order to an algorithm or try to negotiate a block in a dark pool,” Tusar said. “With BlockStrike, our clients now have the ability to accomplish both simultaneously-and all they have to do is to check a box.”
Otherwise, the buyside historically could also go through a high-touch block-trading house to find a natural or they could ask a broker for capital. Now they can do both, as BlockStrike allows users rest an order in a dark pool, while also shopping it around through “contingent orders.”
The algo works by breaking down the initial order down into smaller “contingent orders” that go to the dark pools. Contingent orders are semi-binding orders that signal a willingness to execute a trade, Tusar said. This is in contrast to indications of interest, which are non-binding messages inquiring if liquidity exists and not a commitment to complete a trade.
GSET defines a block as having a trade size of 10,000 shares or more or having a notional amount of at least $200,000. BlockStrike users can trade in blocks larger than 10,000 shares or $200,000 simply by changing the algo’s parameters.
Tusar said the algo chooses the dark pool where the order is placed based on its history of fill rates. Then orders are placed into the dark pools at the same time.
Currently, BlockStrike sources liquidity from Goldman Sachs’ own dark pool SigmaX and BIDS Trading, as they support the contingency order type. BlockStrike could be available in more trading dark pools in the future, Tusar said.
“We’re trying to greatly increase the number of block trades we can electronically source for clients,” Tusar said.
BlockStrike is fully integrated with the firm’s REDIPlus execution management system and through other third-party systems such as Eze Castle, ITG, Bloomberg, Portware and RealTick.
