Chicago-based alternative trading system PDQ has entered into an agreement to provide Lightspeed Financial’s clients with direct access to the venue’s liquidity and unique auction model.
The upshot is that algorithms at PDQ compete with each other to fill orders, rather than an order being displayed in the market and being gamed by the algorithms, according to Keith Ross, chief executive at PDQ.
"We’re a destination they can now execute on," Ross said. "We think our unique pause-and-response model gives the opportunity for clients to get a more competitive execution."
PDQ’s auction model is simple. When PDQ gets an order, it pauses the order for 20 milliseconds, and in that time algorithms respond with their most competitive quotes to build a mini book where the responses are prioritized on a price-time basis. At the end of the 20 milliseconds the trade is matched against the newly created book.
Lightspeed users connect to PDQ via Lightspeed’s Trader platform. PDQ already provides direct market access service to 15 vendors, such as Bloomberg, Fidessa and MiXIT, as well as 70 broker-dealers.
PDQ ATS opened for auction business last November and is powered by an algorithm-hosting facility and response mechanism that is designed to emulate the interaction and dynamism of traditional floor brokers, while retaining the anonymity and confidentiality of a dark pool.
This so-called "electronic algorithmic crowd" enables liquidity-seeking firms to discover contra-side liquidity and assemble block interest from multiple firms simultaneously by asking the electronic version of ‘what is the market’. Rather than holding an order book of resting liquidity, PDQ ATS empowers its community of liquidity providers to respond to order flow via their proprietary algorithmic trading procedures, generating real competition for order flow.
Lightspeed Financial is a leading provider of ultra-low-latency direct market access trading technology, risk management solutions, and brokerage services for both retail and institutional investors.
PDQ trades about 25 million shares a day and average trade size is 400 shares.
