Squawker completes European launch
Sell-side only block trading network Squawker has completed its pan-European rollout, connecting 70 sell-side firms to the new venue, which promises ‘algorithm-free’ trading in 13 European countries.
Originally launched in April, the idea behind Squawker is to provide matching between brokers, who can then negotiate deals on the platform. The concept is based on solving the perceived fragmentation of liquidity in Europe, whereby brokers hold liquidity but are typically unable to connect it efficiently in large blocks.
On the platform, there is no automated crossing, no algorithmic flows, no high-frequency trading and no market data business. Instead, the company aims to follow similar principles to an online dating site or a social network: participants are introduced to each other based on their characteristics, behaviour and interests, but it is up to them to negotiate a deal.
According to Squawker, the platform is currently onboarding 30 firms, with 20 more committed to join up in November and December. Participants on Squawker consist of tier-one investment banks, regional banks, traditional agency brokers, sell-side transition managers, private banks and niche sell-side firms. Most of these are based in London. However, the firm claims to have a strong European following, with onboarding expected to bring the firm access to around 50% of sell-side liquidity in Germany and 80% in the Nordic countries by November. Across Europe in total, the platform claims it currently has 20% of Europe’s sell-side liquidity.
“Whilst Squawker provides the neutral venue for sell-side ‘competitors’ to negotiate against each other those high-touch orders that cannot be matched internally, different participants have different trading strategies and drivers,” said Christopher Gregory, chief executive at Squawker. “By the very nature of the breadth, diversity and plurality of Squawker’s community, with natural flow interacting with risked capital flow, Squawker helps participants find their opposites to negotiate on those orders that are difficult to execute on the order books or in dark pools. Trade interests on Squawker are achieving average acceptance rates of more than 80%.”
Buy-side firms have had platforms similar to Squawker for many years. Liquidnet, for example, is a well-known dark pool that has operated in the US and Europe since it was founded by Seth Merrin in 2001. The platform connects institutional investment firms for anonymous matching, with the idea being to trade in large sizes. Such a strategy has arguably become non-viable on the lit markets in recent years, due to a combination of falling order sizes, predominance of high-frequency trading, and the relatively high market-impact of attempting to trade large orders.