AI-driven stock-trading venue eyes U.S. exchange status, adds new pricing

NEW YORK (Reuters) - Imperative Execution, an upstart, artificial intelligence-driven U.S. stock trading venue operator, is going after the business of the New York Stock Exchange and other bourses by adopting their pricing models and may soon register as an exchange, the head of the company said on Wednesday.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., October 2, 2019. REUTERS/Brendan McDermid

Imperative Execution runs IntelligentCross, a trading platform known as an alternative trading system (ATS) that uses AI to measure its own performance in real time and then make adjustments aimed at improving the quality of stock executions to save investors money.

ATSs are government-registered, broker-run trading venues that have less regulatory burdens than stock exchanges, allowing them more room to innovate, but their bid and offer quotes do not appear on the public data feeds, limiting their reach to subscribers.

Now IntelligentCross plans to either become an exchange, or partner with an existing exchange, to distribute its quotes to the public so it can better compete with the likes of Nasdaq Inc NDAQ.O and Intercontinental Exchange Inc's ICE.N NYSE, said Chief Executive Officer Roman Ginis.

“We’re offering products that none of the exchanges are currently offering,” he said. “We demonstrated that we’re creating value, we’re growing, and now we’re graduating to offer this product to the broader market.”

Since its September 2018 launch, IntelligentCross has become the 16th-largest ATS out of 31, trading 52.5 million shares the week of Sept. 9, according to the latest Financial Industry Regulatory Authority data.

In March, IntelligentCross launched an order type called the Adverse Selection Protection Engine, or ASPEN. Adverse selection refers to trading against market participants who have more information than you, potentially leaving you on the wrong side of the trade.

ASPEN’s AI queues up displayed orders and matches them 150 microseconds to 300 microseconds apart. Not matching them immediately gives automated systems a chance to adjust the quotes if necessary, depending on what the market does in the interim.

Users of ASPEN currently pay a flat fee on either side of the trade. But at the end of October, they will be able to choose one of three pricing systems: a flat fee, a rebate for adding liquidity, or a rebate for taking liquidity, depending on the order.

“We believe we can offer ASPEN as a product wherever people want to trade, at every price schedule, and we believe this product can improve the liquidity for all of these use cases,” said Ginis.

(This story corrects to remove reference to order size in paragraph eight.)

Reporting by John McCrank in New York; Editing by Matthew Lewis