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Accessing Liquidity: SIGMA and SIGMA X. Presentation to Bright Trading September 17, 2008 Denise Fiacco, Jack Mahoney, Justin Lerner. Then and Now: Listed Shares. Then and Now: Listed Shares. 2001. 2008. 2008 1. 11%. ~ 5%. 3%. Regional. Broker-dealers. Broker-dealers. CHX. NYSE.

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Accessing Liquidity: SIGMA and SIGMA X

Presentation to Bright Trading

September 17, 2008

Denise Fiacco, Jack Mahoney, Justin Lerner

then and now listed shares
Then and Now: Listed Shares

Then and Now: Listed Shares












Other exchanges


NYSE Hybrid


NYSE Group













Nasdaq Single Book












Crossing networks


1. Jan 08. Single-counted share volume, internal matches only, all Tape hours. For some venues the estimates are rough approximations.

Shapes not in proportion to actual market share.

market landscape fragmentation
Market Landscape: Fragmentation

Complex US Liquidity Landscape

** Reflects TABB group reported volumes for June 2008.

simplified ecn landscape
Simplified ECN Landscape

Simplified, Consolidated ECN Landscape

** Reflects TABB group reported volumes for June 2008.


Complex, Fractured Dark Pool Landscape

** Reflects Rosenblatt Securities reported volumes for July 2008.

dark pool competition
Dark Pool Competition

The Actual Numbers …

** Reflects Rosenblatt Securities reported volumes for July 2008.

the sigma smart router

Smart Routing: SIGMA

The SIGMA Smart Router


  • SIGMA creates a “game plan” for every order it receives
  • The original parent order is decomposed into child orders according to:
    • NBBO
    • Internal ranking table
    • Depth of book feed (real time from all major pools of liquidity)
  • Orders sent to pure electronic exchanges are routed with an IOC (Immediate or Cancel) time-in-force
  • Orders sent to partially electronic exchanges (Hybrid NYSE) are routed with a DAY time-in-force
  • Prior to routing to public markets, SIGMA will search for liquidity in SIGMA X

This is an iterative process:

  • SIGMA creates a new game plan for the balance of the order
  • Subsequent game plans depends on whether the order receives a fill or an out from a particular venue (no fill at all from particular destination, they are removed from the game plan at that quote, but if quote moves we may go again irrespective of whether we were filled at prior quote)
  • Posting destination(s) fully customizable

SIGMA Smart routed orders

Customer ATS




SIGMA Listed vs. OTC Executed Volumes

Listed Breakdown

OTC Breakdown

sigma x

GSET Flow Diagram

Algo Orders






Routed Orders






SIGMA X Posted Orders

REDIPlus Orders to SIGMA X

REDIPlus Portfolio Trader Waves to SIGMA X

REDIPlus X-Posted Tickets

FIX Orders to SIGMA X





SIGMA X: Executed Flow Composition







SIGMA X Directed


SIGMA Routed

Customer Pool: 90%

Liquidity Providers:10%


SIGMA X: Execution Breakdown by Market Capitalization/Sector

Market Capitalization


Small 11%

Large 56%

Mid 33%

• Volumes in various sectors track the market closely, overweighed in IT, underweighted in Financials.


SIGMA X: Order Types and Parameters

Order Types: Limit, PEGbid, PEGmid, PEGask, Ping (limit IOC)

• All peg orders float with the NBBO on the side specified. For example, a buy order pegged to the bid floats with the national best bid

• All possible spread capture/price improvement goes to the liquidity provider


SIGMA X: Customer ATS Execution Analysis

Large 56%

• Limit and PEGmid most common. PEGbid/ask used much less frequently.

• ~16% of executions are limit buyers interacting with limit sellers.

• PEGmid buyers interacting with limit sellers comprise 31% of executions, while PEGmid sellers interacting with limit buyers comprise an additional 31% of executions.

• An additional 18% is PEGmid buyers interacting with PEGmid sellers.

• ~34% of PEGmid executions occur at a more favorable price (34% (16.8/50)) of PEGmid buyers execute on the bid, and 34% of PEGmid sellers execute on the offer).

* Sample period is from January 2, 2008 – April 4, 2008


SIGMA X: What We Do To Prevent Gaming

• Real-time monitoring and alerts (work in progress): We monitor all orders that are directed to SIGMA X and are alerted to large-sized orders, high participation rates, excessive price moves and abnormal spreads.

• Advanced monitoring tools: graphical interface that allows us to view a particular execution along with all relevant quote/trade data.

• Regular monitoring of historical performance: automated tools and reports to monitor the performance of clients that provide liquidity.

• Internal checks and balances on DMA and algorithmic flow: ability to set default SIGMA X anti-gaming measures (MXQ, opt-out of certain flows, etc.) at both client and order level.


SIGMA X: What You Can Do To Prevent Gaming

• Prevent ‘fishing’: use an MXQ (minimum execution quantity) on orders directed to SIGMA X to avoid small fills. This quantity is the minimum size you are willing to cross and can be set as a default per user or on an order-by-order basis.

• Reduce impact: be sure to specify a bottom/top when using a peg order type to avoid excessive price impact. Keep in mind that dark executions do hit the tape.

• Call us: if you have any questions or concerns about a particular order or execution, call your representative.


SIGMA X: Executed Volume Trend

• Average execution size = 600 shares

• 1B shares ADV intractable flow

• 21% of GSET algorithmic executions occur in SIGMA X

• SIGMA X latency = less than 1 ms

• 4,000 unique symbols executed per day


2008 Global Electronic Trading Disclaimer

This message is not the product of the Global Investment Research Department or Fixed Income Research. It is not a research report and is not intended as such.

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