Citi unveils pricing tool for block trades
Citigroup is launching an electronic pricing tool that will allow its institutional customers to see prices for equity block trades, as it seeks to simplify the trading process and draw more business.
It will allow hedge funds, asset managers and mutual funds to trade on prices shown on their screens rather than the more traditional methods used for large tailored block orders such as phone calls to and from banks for price quotes.
A block trade of shares is typically a parcel of 10,000 shares or above.
Trading electronically helps to limit information leakage as clients do not have to discuss their plans over the trading floor telephones.
Citi says that it will not receive information on a client’s inquiry unless it executes the trade.
“This is just the ability to price real time blocks,” Mani Singh, a director in global execution sales at Citi said. “It offers greater transparency to the client without information leakage and signalling.”
He added: “At the moment there’s nothing in the market to create – on demand – a price that’s actionable specific to their order size.”
In trading, an “actionable” price means that clients can trade at that price as opposed to an indicative price.
The product builds on the bank’s electronic block execution platform that offers clients access to Citi’s $22bn liquidity in asset classes from exchange traded funds to US stocks and Latin American equities.
Citi’s equity trading business grew its revenues to $539m in the fourth quarter of last year from $465m a year ago.
That is about half the size of Bank of America and a third of the size of Morgan Stanley. The latest addition will form part of the Bloomberg App portal, a platform on the terminal for third-party applications.
Claudio Storelli, global business manager for the Bloomberg App portal, said: “It’s a way for the user to do more with less clicks and less time, it’s a much more efficient, modern way of executive block trades.”
Citi’s move comes as block trading of equities has come under scrutiny from US regulators amid a crack down on proprietary trading with the implementation of the Volcker rule, under the 2010 Dodd-Frank Act.
A block trade usually involves the bank holding a parcel of securities for a period until it can find another client to buy that stock, raising the debate of whether this constitutes market-making or proprietary trading.
Citi’s efforts come as several of the world’s biggest asset managers discuss the creation of a joint equity trading venue, to attempt to stem the technological arms race sparked by high-frequency trading firms.
Fidelity, the Boston manager with $1.9tn under management, has consulted with rivals about putting equity trades through a central venue that would rival mainstream stock exchanges and so-called “dark pools” of liquidity.
Equity markets have experienced a pronounced reduction in order and transaction sizes and significant fragmentation of liquidity across numerous trading venues.