Electronic broker Instinet is to introduce a European 'smart routing' service, to automate the search for best execution among competing European exchange.
Smart routing is commonplace in the US equity markets, where it was first inroduced by competing electronic communications networks in an effort to reduce fragmentation of liquidity.
In Europe, the Instinet service will initially be implemented for trading in Dutch equities, reflecting growing competition between exchanges for investor funds, and will begin by searching prices from Euronext Amsterdam, the London Stock Exchange and on Instinet’s own Continuous Block Crossing platform (CBX).
The system uses a price-sensitive spraying algorithm to achieve the best available price on marketable orders by systematically scanning all markets trading a particular security, and by routing portions of the order to each venue accordingly.
Natan Tiefenbrun, president of Instinet International says SmartRouter will be the first facility of its kind for European equities available to institutional investors globally.
He says: "As the UK and European regulators look ever more closely at the definitions of best execution, so we want to be in a position to offer our clients access to technology that helps them meet their fiduciary obligations."
Access to the system is available through either of Instinet’s front-ends, Newport or InstinetAdvance, via FIX, from third-party order management and execution systems, or via any of Instinet’s algorithmic trading platforms including VWAP, Trading Rate or Pairs Trading Rule.