Liquidnet, the technology-driven agency execution specialist, has launched Roll Seeker, a new tool designed to enhance workflows associated with the execution of futures rolls. The development responds to member requests to utilise Liquidnet’s block trading expertise to discover contra end-user liquidity interest more effectively.
“With exchange-traded derivatives being such a mature market, we wanted to bring some innovation to simplify workflows and introduce a Liquidnet approach to the space,” says Darren Smith, Head of Listed Derivatives EQS at Liquidnet, in conversation with TradingTech Insight. “That means a technology-driven approach, relatively intensive and intelligent use of data, and solutions inspired by the classic equity products where Liquidnet really built its name. We aimed to incorporate all of that into the listed derivative space and offer asset managers a dedicated agency-only desk that’s independent of conflicts of interest.”
Roll Seeker aims to bring greater structure to the bilateral negotiation process around calendar rolls, ensuring best execution with minimal information leakage. As an extension of Liquidnet’s execution services under its agency model, the tool targets efficiency in an often-overlooked market segment. It follows closely on the heels of the company’s pre-trade analytics release.
“When clients are working on these quarterly calendar rolls, there’s a workflow issue with buyside traders trying to get mid-market access, which can be a tremendously labour-intensive process,” says Smith. “The whole process is very manual, bringing in keying errors and other issues. We wanted to bring the efficiency gains to the whole process, including the bilateral negotiation of blocks.”
He continues: “We also wanted to solve the coordination issue that exists in calendar rolls. There’s a significant problem of ‘you show me yours, and I’ll show you mine’. This back and forth can be incredibly laborious. Roll Seeker addresses this by collating indications of willingness to trade at a mid-market level on an anonymised basis. This eliminates the coordination and timing issues where people aren’t necessarily willing to show their axes simultaneously. These indications can be submitted to Roll Seeker, and when opposing interests are found, the system alerts users.”
The new tool facilitates bilateral negotiation of blocks at mid prices in fixed income and equity index calendar rolls. Members can access Roll Seeker directly from their execution and order management systems or via the Liquidnet desk, which offers automated contingent functionality with the exchange order book.
“All of this operates within a trading infrastructure based around the FIX methodology and electronification,” explains Smith. “These orders go back and forth via the FIX pipes that come through to the traders’ blotters. It integrates seamlessly into client workflows, allowing for a much smoother execution process. From a workflow perspective, clients can route their interests to Roll Seeker through their existing O/EMS. They come in as FIX messages to our systems with the necessary tags, and we route those orders accordingly. It’s pretty seamless.”
Initially available for UK and European fixed income and equity index futures, Liquidnet plans to expand Roll Seeker’s capabilities and integration with various order types and algorithms.
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