Big xyt Readies New Liquidity & Trade Analytics Tools

Data and analytics provider Big xyt has developed three new tools to help clients perform pre- and post-trade liquidity and trading analysis. The offerings aim to help investors assess the time required to liquidate positions, the best venues to execute those trades on, and find price disparities that may signify erroneous data or other factors affecting a price.

Mark Montgomery, head of strategy and business development at Big xyt, says some of these tools are currently being tested.

The first addresses portfolio liquidity analysis. Montgomery says that as volatility resulting from the coronavirus pandemic has rocked the markets, asset owners are asking asset managers about the liquidity of their portfolios. Montgomery contends that many of the commonly used portfolio analysis tools were developed by executing brokers and are not independent. In the worst case, this setup can expose an investor’s strategy to the broker prior to the asset manager placing an order.

“A fund manager does not want to ring up a broker and say, ‘Can you tell me how long it will take me to liquidate this portfolio,’ because that generates a bit of information that might make the broker suspect that fund manager is about to trade,” Montgomery (pictured) says.    

The Big xyt tool can be used to analyze how long it would take to trade a certain number of shares in a particular stock, should an investor want to liquidate all or part of a position.

The tool was developed in the past few weeks and is separate from Big xyt’s other offerings, but leverages data from its Liquidity Cockpit platform.  

“We designed the tool, which we deployed within two days, and worked with two fund managers to immediately tell them—depending on the level of aggression in the marketplace—how quickly they could liquidate 10, 50 or 100 percent of their portfolio, and also point them to the stocks within that portfolio that had a disproportionate lag on the time that would take,” he says.  

The second tool the vendor has unveiled provides pre-trade information around which venues will deliver the best results for trading large blocks of stocks. The liquidity intelligence tool analyzes data across exchanges and dark pools to determine the historical probability of filling an order in each market, and informs the user how much of an order they should send to which trading venue.

“As soon as your order starts to get larger, you start to trade at the block venues. When your order is smaller, it does not matter quite so much and you can go to the smaller venue,” Montgomery says.

Montgomery says the intelligence tool can be used as a standalone solution, or it can be used by existing clients as an add-on to Liquidity Cockpit for an additional fee.

Big xyt’s third rollout enables corporate clients and treasurers to see executed block trades on an individual stock, and whether—during the day or after hours—trades in that stock are executing at prices that are dramatically different from the price that the community could access during the trading day.

“That could be indicative of a predator; it could be indicating large volumes going through because of the benchmark trades; and sometimes it just indicates a clumsy, bad piece of data that we can quickly identify as being a mistake that has to be corrected—either by the data vendor or the person who has reported the trade,” Montgomery says.

The service lets users look at price movement over time, how the share price movement compares to volatility in the marketplace, how the spread in the stock changes, and where the liquidity has been trading, such as dark pools or lit order books.

Montgomery says the single-stock tool can also be useful for buy-side and sell-side traders who want to understand whether there is an additional activity in a stock above and beyond normal trading levels. 

The three implementations are in various stages of beta testing. Montgomery says the portfolio liquidity analytics component is currently available, although it needs a bit of “polishing.” 

While the tools are a response to recent market developments during the Covid-19 outbreak, they also address long-term issues in the market.

“When we drill down deeper, we’ve realized that our tools can expose some of these anomalies and these outliers, even during normal trading times,” he says. “What we are realizing is that some trends look on the surface quite benign, but beneath the surface, you have to drill down and see that within each component stock and its component index, there are all sorts of different gyrations in terms of spread volatility and liquidity, which people should be being careful about.”

The firm has also been looking at developing interoperability tools, and had had discussions with desktop software integration provider Glue42.

“People with interoperable tools want to just maybe have a widget that displays a small subset of the analytics that we perform, but they might really like a particular chart or a particular table to appear on a daily basis when they come in in the morning. So we’re building tools so they can be accessed through interoperable windows, but also through our own global user interface, or through separate emailed reports, or whatever browser interface people want. We can make the delivery flexible,” Montgomery says.