Appital’s new Insights offering is designed to unlock liquidity unavailable via traditional electronic trading venues, allowing buy side institutions to assess the viability of executing larger average daily volume (ADV) orders without risking information leakage or price erosion. Appital’s Matt Jefford told BEST EXECUTION how Insights helps to solve the problems of liquidity fragmentation and price erosion for asset managers.
Appital Insights allows traders and portfolio managers (PMs) to gain exposure to liquidity events in relevant equities that meet their minimum ADV or pricing thresholds.
Appital’s head of liquidity solutions, Matt Jefford, told Best Execution that fragmentation of liquidity and shrinking order sizes is a well recognised problem in the industry.
“The number of dark, block or LIS venues has increased while ticket sizes have generally shrunk, which poses a big challenge for asset managers if they wish to make significant moves.”
Appital Insights and Appital Turquoise Bookbuilder provides a single connection between all participating firms, and consolidates all of these trade sizes into one point, meaning buy side traders do not need to rely on chance to find the other side of the trade.
“Our platform provides real-time feedback on the viability of executing larger ADV orders without alerting the market. As a result, buy side peer-to-peer interactions lead to liquidity discovery and price formation in volumes often in excess of multiple days ADV, in large but also small to mid-cap stocks; crucially without the risk of price erosion.”
With current electronic trading mechanisms there is a limit in terms of what they can execute for a client, and what the client is comfortable showing to a venue in one go – which is typically around 25 to 50% ADV. Many orders over 500% ADV are handed over to a broker. “Therefore, liquidity becomes fragmented across multiple services. Appital Insights changes this. Traders and PMs can show indications of anything between LIS size and tens of days volume, given there is no risk of market signalling as the technology does not match or execute anything.”
Liquidity of all sizes becomes consolidated to a single point and firms then have the optionality to interact with those sources in Appital Turquoise BookBuilder.
“Opportunities that have come into the Appital platform today have ranged from 10% ADV to 1400% ADV. There’s clearly a gap in what’s possible with current providers.” Jefford said.
Appital Insights builds out the existing bookbuilding capabilities via Appital Turquoise Bookbuilder, which automates and electronifies a typically manual process, with the ability to execute large volumes on the regulated Turquoise MTF.
Data held within Appital Insights provides automated feedback on live positions and the likelihood of driving liquidity in any relevant name, giving traders and PMs the confidence that they will find deal contras before they proceed to launching a bookbuild.
Appital CEO Mark Badyra said: “Launching Appital Insights is the next step in our evolution and complementary to the existing price and deal formation process.
“Buy side firms no longer have to enter the market with a larger ADV order without the confidence that the trade will complete at a single shape and price which they are comfortable with.”
Appital went live with European stocks in May 2023 and has seen deal flow opportunities worth $200m in the platform since then, with an average opportunity size of 2.5 days ADV.
Since launching Appital Turquoise Bookbuilder in August 2022, Appital has onboarded 25 asset management clients, who manage a combined US$12 trillion of assets under management (AUM). A further 40 asset management firms are currently going through the onboarding process, jointly managing $28 trillion AUM.
©Markets Media Europe 2023
