Appital,the institutional buy-side liquidity platform, is extending into an area of equities trading that has remained stubbornly dependent on high-touch interaction, adding continuous institutional risk pricing through a new integration with Citadel Securities.
The development, part of the rollout of Appital V2, will give institutional asset managers electronic access to extended liquidity across more than 1,500 European equities, ranging from Large-in-Scale (LIS) orders to potentially multiple days’ average daily volume (ADV). Citadel Securities is the first liquidity provider to support the new capability.
Appital’s platform was originally designed around natural buy-side-to-buy-side matching, where the ability to execute depended on compatible interest appearing at the right time. V2 introduces institutional risk capacity alongside that natural liquidity, allowing traders to obtain an immediate firm risk price electronically.
“With V1 we were always constrained by timing: a client might have a live order today and the contra could arrive two days later, when the trade had already gone,” Brian Guckian, Chief Business Development Officer at Appital, tellsTradingTech Insight. “With V2 we’re bringing certainty to the platform because a risk price is available immediately.”
Electronifying the high-touch trade
Electronic SI liquidity has become well established in equities, but much of it is concentrated around relatively small sizes. Large institutional orders requiring a principal risk price have typically remained the territory of the sales trader, with buy-side firms contacting banks directly to establish their appetite.Appital is seeking to move that workflow onto the electronic desktop.
“We’ve digitised another piece of the high-touch sales trader,” says Guckian. “This is Appital-sized liquidity – half a day, a day, multiple days’ volume – rather than the much smaller sizes typically associated with electronic SI liquidity. That’s what makes this a new piece of market structure for equity trading.”
The result is effectively three ways to execute through Appital: the original natural buy-side-to-buy-side model; natural liquidity supplemented by risk liquidity; and pure risk execution, where a trader can act immediately without waiting for a natural contra to emerge.
The latter brings a workflow traditionally conducted by phone into an electronic environment, while addressing one of the persistent concerns around large-order trading: information leakage.
“The only way clients could currently get that kind of price is by calling someone up and relying on high-touch, manual discussions,” observes Mark Badyra, Founder and CEO of Appital. “That’s fraught with concerns around information leakage because that information in the wrong hands could have a negative impact on what you’re actually trying to do.”
From snapshots to continuous risk discovery
Appital’s approach also changes the way traders can assess risk liquidity.
“Because this is all in an electronic environment, clients can understand risk capacity continuously throughout the day,” Badyra explains. “That’s very different from calling an investment bank and getting a snapshot at one point in time. They can track the price over the course of the day and decide when, or whether, they want to execute.”
The workflow has been integrated with five of the major EMS platforms used by Appital’s target institutions. Traders can send live orders directly from their blotter and receive feedback on both potential natural buy-side interest and available risk capacity.
Importantly, the system requires a live order. Traders cannot simply enter a ticker to interrogate available risk prices, a design intended to prevent the platform being used to probe liquidity without genuine trading interest.When a trader chooses to execute against the risk price, the transaction can be completed electronically in a single click.
Expanding the network
Appital currently has 57 buy-side firms on its platform, which it says represent around a quarter of global assets under management. The company believes the addition of immediately available risk liquidity could also accelerate adoption by removing one of the limitations inherent in a network dependent solely on natural matching.
The company describes the new model as providing value without requiring clients to wait for “organic network density” to develop. The existing buy-side network remains central to the proposition: adding risk capacity is intended to complement rather than replace natural liquidity, potentially increasing the number of orders submitted and therefore the opportunities for buy-side-to-buy-side interaction.
By putting continuous institutional risk capacity alongside natural buy-side liquidity and making both accessible from the EMS blotter, Appital V2 is pushing electronic execution further into a segment of the equities market that has continued to rely heavily on the phone.
The capability is currently being introduced through a controlled rollout to Appital’s institutional client network before becoming more widely available.
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