Broadridge has launched an AI-led tool to support buy-side firms’ execution decisions for its NYFIX order routing network.
FIX-based order routing networks are offered by a number of companies. Bloomberg, LSEG’s Autex Trade Route, FlexTrade and Trading Technologies are among Broadridge’s competitors in this space.
To differentiate from the market, “what we’ve built in essence is the Waze of trading,” George Rosenberger, head of NYFIX at Broadridge Trading and Connectivity Solutions explained to Global Trading.
“It’s a navigation tool, to set the user on the optimal execution path and keep them out of trouble. It sees things we can’t, and just like with Waze, if something changes along the journey, we will notify the trader via a liquidity alert.”
“Traders have so many algo choices available to them. It can be information overload. This tool will provide insights into the specific strategy to use for the name they are looking to execute,” he noted.
“While traders often assume stocks with similar traits trade alike, our research reveals that liquidity demands are the true performance driver. Our tool maps the algorithmic landscape based on a stock’s liquidity characteristics and market environment,” added Linda Giordano, who is consulting with Broadridge and is founder and CEO of Babelfish Analytics.
This tool aggregates public, private, historical and real-time data from across the industry, “which we stitch together using AI to create a time series that gives us a complete view of market liquidity,” Rosenberger said. “Then we make a recommendation on which strategy to use.”
Traders receive real-time alerts and in-trade analysis, with updates provided to allow for amendments throughout execution. The tool aims to reduce outlier trades to 10% or below, improving overall costs for the buy side.
The service can also identify where dark pool liquidity is developing. “Mapping the appropriate algo to where the dark pool activity is bubbling up has a substantial impact on performance,” Giordano explained. “It’s something that traders have been trying to get a handle on, and we finally have the technology to do it.”
Executing in the dark allows for anonymity and lower implicit trading costs, however the tool does not automatically favour dark pools. “If there’s not any liquidity there, then it will tell you the opportunity cost and send you to the appropriate exchange. Traders can be a little cautious, but if you have to make that decision you want to make it at the appropriate time. This model will tell you when to pull the trigger.”
The service follows last year’s launch of NYFIX Fill Matching, a service designed to support real-time reconciliation for high-volume trading. Fill Matching was developed to address market demand for synchronisation between brokers and asset managers and provide an end-of-day processing solution for the T+1 environment.
“We’re not supplanting traders’ gut instinct – there’s a reason why they’re the best traders,” Giordano continued. “But having a decision-making tool confirms that they’re doing the right thing, and can give them new ideas.”
“Broker algos are highly differentiated, however one of the key similarities is that they all contain a liquidity sourcing mechanism. We have developed a proprietary system that identifies where a security is likely to trade best under specific market conditions.”
However, Rosenberger clarified, “we are not an algo switching engine, we are not an algo wheel. We’re simply making a recommendation to traders based on the expertise and data that we’ve assembled.”
The service is currently available to NYFIX Order Routing customers in US equities. Broadridge has shared its intentions to expand the offering to other asset classes and regions, and to clients on other order routing networks.
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