BMO and Jefferies sign on to platform bringing AI auctions to stocks
A new trading platform operated by OneChronos Markets LLC will let institutional investors bid for equities in an automated auction, an effort to disrupt the ages-old system for buying and selling stocks.
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OneChronos started this month with Bank of Montreal, Jefferies Financial Group Inc. and more than a dozen other broker-dealers signed on. The New York-based firm’s technology enables potential buyers to dictate what they think the value of a portfolio or large quantity of stocks is at a given time, known as an “expressive” bid.
“Our system gives investors a greater level of control and detail over how their orders are executed,” co-founder Richard Suth said in an interview. The goal, he said, is to slow down the process and let investors have more say over how trades are executed.
The firm’s software uses artificial intelligence to allow participants to input what they determine is the value of large order, or a collection of stocks, which is fed into a matching engine on a randomized basis. OneChronos then pairs orders from the buy and sell sides through periodic auctions. If values match from both parties, then the trade happens.
Among the early adopters of OneChronos is Bank of Montreal’s electronic trading group.
“Because we can express, under the terms and conditions we really want to trade, it can help us save our clients money and lowers implementation costs,” said Eric Stockland, who oversees institutional electronic quantitative strategy at the Canadian bank.
OneChronos runs roughly 10 auctions per second across all US stocks, said Suth, who spent more than a decade trading equities at Goldman Sachs Group Inc. All matches are made within what’s known as the national best bid and offer, the standard quote that reports the highest asking price and lowest offered price in a security, sourced from all available exchanges or trading venues. If a trade is filled through OneChronos, the fill-size and price is then printed to the public tape.
“We are not trying to take market share from existing players,” said Kelly Littlepage, co-founder and chief executive officer of OneChronos. “We are trying to unlock economic value for investors through mutually beneficial trades that otherwise would have gone unrealized.”
The new platform needs sufficient liquidity from institutional investors to source and execute the best possible trades. The more participants OneChronos has, increasing the overall pool of liquidity, the better the outcome, its executives said.
The field of alternative-trading systems is crowded with new entrants fighting for orders. Many like OneChronos are looking for an edge to attract investors and broker-dealer clients. Last year, Blue Ocean Technologies LLC started its own ATS that lets investors buy and sell equities outside of traditional US market hours.
OneChronos has raised over $20 million from Y Combinator, BoxGroup, Green Visor Capital and other investors, and the firm’s valuation is roughly $250 million valuation after a financing round this month, according to Littlepage. The company’s third co-founder, Stephen Johnson, is a former senior manager Accenture Plc. Bernard Dan, former CEO of Sun Trading and CBOT will lead the ATS, with a focus on the operations and growth of the platform. Jesse Greif, OneChronos’s chief operating officer, also worked at Goldman Sachs, where he was head of electronic principal liquidity solutions and quant-strategies sales.
–By Katherine Doherty (Bloomberg)