Trading Opportunity Alert: Barclays LX Dark Pool

Dear Manager,

Effective Wednesday, April 3, 2019, traders will have access to the Barclays LX dark pool on the NASDAQ, NYSE, and NYSE American (AMEX) markets.

To configure the applicable order type, open Keyboard Setup and select the “BARC” gateway. The gateway fee for executions will be 0.0015 per share.

Price Improvement Model

Currently, 97% of DTTW™ order flow is providing liquidity, and 100% of orders have been Day Limit at this point.

Barclays LX operates with an even split of spread economics between the provider and the taker of liquidity, which allows for marketable orders to capture price improvement.

This price improvement would also apply to liquidity removing flow, where if an attempt is made to hit a bid or lift an offer and there is liquidity available within the spread, traders would get price improvement on the take flow as well.

When there is spread overlap, price improvement opportunities are divided between the provider and the taker of liquidity, 50/50.

Example

The Level1 for XYZ is 152.05 | 152.06. Trader A provides liquidity with an order to buy at the offer price (buy at 152.06). An order comes in from Trader B to sell at the bid (sell at 152.05). Next:​

• Trader A is posted to buy .01 above the bid, creating a spread overlap of .01
• 50% of the spread will go to Trader A, who is providing liquidity: 50% × .01 = .005
• 50% of the spread will go to Trader B, who is taking liquidity: 50% × .01 = .005
• The trade will execute at 152.055
• Therefore, Trader A buys at 152.055 instead of 152.06, resulting in 50 mils of price improvement; Trader B sells at 152.055 instead of 152.05, resulting in 50 mils of price improvement
• Note: traders may get sub-penny executions in Barclays LX due to price improvement logic

Fill Rate Statistics

Segmentation of Order Flow

Barclays employs a framework called Liquidity Profiling for categorizing liquidity removing activity within the ATS.

Liquidity Profiling categorization applies only to subscribers that route directly to LX when removing liquidity, and is based on one-second alpha, which is the midpoint-to-midpoint market movement over a one-second horizon, normalized by the daily average spread.

Based on this metric, subscribers are placed into one of three Alpha categories: Low, Medium, and High (Low being the lowest Alpha category <0.141, and High being the highest Alpha category >0.201).

Barclays reserves the right to review and adjust the factors considered when categorizing subscribers based on their order flow that removes liquidity. Orders routed to LX by the Dynamic Router or the Algos are placed into the Low Alpha category by default.

On a monthly basis, Barclays reviews the Liquidity Profiling categorizations of subscribers that route directly to LX, based on 20 trading days. Barclays retains discretion to override a subscriber’s Liquidity Profiling categorization by maintaining that subscriber in its previous, higher Alpha category (an “Override”).

Barclays will consider previous trading behavior when determining whether to apply an Override and may wait for additional data before implementing a change to a lower Alpha category, if such a change to a lower Alpha category is indicated by Liquidity Profiling.

Note: Barclays’ discretion is not used to move a subscriber to a lower Alpha category than that indicated by Liquidity Profiling.

MinTime

MinTime is only available to Institutional subscribers but benefits Broker Dealer and ELP subscribers by promoting longer duration orders.

This is as an alternative filtering functionality to Liquidity Profiling and Counterparty blocking will allow for matching eligibility provided the order duration requirements are met.

Blocking by Minimum Duration (“LX MinTime”)

LX MinTime is a counterparty restriction functionality that allows Barclays Institutional Clients and Algo/Router Users to limit interactions with LX direct subscribers to only those orders of LX direct subscribers that have rested on the LX order book for a minimum of one second.

Note: this does not restrict the client’s interactions with any other order flow in the ATS that is not entered from a direct order entry connection. Also, the LX MinTime length is configured by Barclays’ personnel and may be periodically updated.