Announcing… a Brand New Dark Pool! Our Very Own Themis Match!
Today marks a pivotal day in Themis Trading’s history. Today, we finally take our knowledge of market structure – of how all the pieces of supply and demand fit together – and we use it to create a product that wins for everybody.
Today, we launch our new dark pool –
TheMis Match Themis Match!
There are so many things about Themis Match that should make you all excited; we don’t even know where to begin. To help us explain how Themis Match works, we have enlisted the help of our old friends, Fred and Ethel!
Take it away guys…
F&E: Guys, this is genius! You seem to have taken everything Themis knows about market structure and liquidity, and created a trading venue that matches trades so that everybody wins. Can you tell us more about it?
S&J: Sure Fred and Ethel, as you know we learned a few things along our market-structure knowledge journey… like:
Prop traders need to be compensated for adding liquidity. Adding liquidity is so crucial for functioning markets! If prop traders get enough compensation for adding liquidity, then the market gets tight spreads at something called the NBBO, and the SEC is happy.
Nobody likes to get run over. By that I mean, prop traders don’t like to buy something at 50 cents, and then see it go lower. Oh… and investors don’t like to buy something like Lumber Liquidators at a high price, and the next day see it go lower as well.
Retail traders are to be held in the highest regard – and given guaranteed price improvement! They should get prices that are better than the bid if they are selling, or better than the offer if they are buying.
Simplicity is always better. Fewer order types are always better.
F&E: You guys have been consistent on that – we know. SO what is TheMisMatch? It is a new stock exchange?
S&J: Well… almost. It is a new Dark Pool! And please pronunciation is important – emphasis on the “The” please… Themis Match… not “The Mis-Match…” Mess that up, and you change our whole vibe-thing. Themis Match is a new innovative way to bring liquidity from different constituents together in one single pool. And it is a FAIR POOL!
F&E: How so?
S&J: First of all, anybody can connect to Themis Match. Anybody! We do not discriminate. Any broker or trading firm can connect to us directly. We have POP, Fast Lanes, Slow lanes… users can choose their interaction and speed. And retail clients get to us using their online broker’s order router – they don’t have to worry about all the connection stuff. Their online broker will make the magic happen for them automatically! How do we make money? Easy. First of all, we have no maker-taker commission pricing! Every HFT and institution and connecting broker pays us the same 8 mil flat rate. And we lease our GUI for a monthly charge, and lease out our connections, and we also charge for clearing the trade, and SEC fees, and a small nominal commission rate, some pass-throughs like advertising fees, third party payments to online brokers, etc… minor things like that.
F&E: Guys this sounds great. If anyone deserved a way to capitalize and monetize all they have done to educate the public on why market structure matters, it’s you guys. So let’s get to it. What are the rules of the road? How does the pool work?
S&J: Easy Peezy!
There are only two order types. Buy and Sell. Brokers, institutional algos, high speed market makers, investors… they can only enter a buy order, or a sell order in a stock. Just buy or sell, and quantity of shares. Nothing else. No prices. We plug in the prices. No pricey hidey slidey. No wacky pricy partial posty. No pingy… No dark pool rooms… The price is determined by Themis Match.
Actually the price for all trades is the midpoint between the bid and ask at the exact moment of the prior day’s closing auction! So if IBM closed yesterday, when the bid was $160.45, and the ask was $160.55, then the price for all trades in IBM done today in Themis Match would be $160.50! How awesome is that?
F&E: Wait… so you can enter orders today to buy or sell a stock, and be matched at a price point near the close of yesterday? I think we are missing something…
S&J: No you are missing nothing. Check it out:
High speed market makers would see that IBM closed yesterday at $160.50ish, and that today the market is higher, and IBM is trading on other exchanges at a high price – say $162.00. They will love to enter buy orders in IBM on Themis Match! They will not get run over. They will be able to arbitrage, which is crucial for efficient markets. They can sell at $162.00 on the other exchanges, and buy in Themis match at $160.50. They will be happy to add liquidity! They will be compensated to add liquidity!
Institutions on the buyside will also enter buy order in IBM on Themis Match. I mean why wouldn’t they? They hate the feeling of buying a slug of something and then getting run over like a blind squirrel by firms like that Connecticut Hedge Fund.
Retail online brokers will send their IBM sell orders to Themis Match. They will do so because Themis Match will take some of the fees we charge the institutions and MMs, and use them to rebate the retail brokers.
The retail investor represented by the retail online broker? He/she gets the best deal of all! He/she gets price improvement from the closing bid or offer! Instead of selling IBM yesterday at $160.45, they sell it today at $160.50! That’s not sub-penny improvement; that’s a whole shiny nickel!
F&E: Crap! Gentlemen – you did it! Something for everybody! Everyone here wins! Retail gets price improved from yesterday’s closing bid/offer, HFT market makers get compensated for providing the market liquidity and efficiency, institutions also get a chance to interact with the retail order – which before today was simply unheard of – only Citi, KCG, UBS, and Citadel got that right… We are so proud of you!
J&S: Thanks Fred and Ethel. You have been on this knowledge journey the whole way with us. By the way, we are taking you to Le Cirque in 2 hours! We want to show you our new Themis Bentley! We just have to stop by Barron’s offices first; they want to do an article on Themis Match, and how we also help retail win! We are excited indeed…
Please contact your Themis Match representative for more information at 1-800-Match666. Choose option7, then option 6. Themis Match makes no warranty expressed or implied for pricing and trades done in Themis Match. Users of Themis Match agree to hold Themis Match, Themis Trading, Themis Holdings Imperial LLC, Themis Trading Bermuda, Themis Trading Nigeria, Themis Trading Moscow, all from hereto on o be referred to as The Themis Companies harmless. All Rights Reserved. Permission to use, copy, modify, and distribute this software and its documentation for educational, research, and not-for-profit purposes, without fee and without a signed licensing agreement, is hereby granted, provided that the above copyright notice, this paragraph and the following two paragraphs appear in all copies, modifications, and distributions. Contact The Office of Technology Licensing, Themis Match, (1800Match666), for commercial licensing opportunities. Created by John Smith and Mary Doe, Department of Statistics, University of NJ.IN NO EVENT SHALL REGENTS BE LIABLE TO ANY PARTY FOR DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS, ARISING OUT OF THE USE OF THIS SOFTWARE AND ITS DOCUMENTATION, EVEN IF REGENTS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THEMIS SPECIFICALLY DISCLAIMS ANY WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE SOFTWARE AND ACCOMPANYING DOCUMENTATION, IF ANY, PROVIDED HEREUNDER IS PROVIDED “AS IS”. REGENTS HAS NO OBLIGATION TO PROVIDE MAINTENANCE, SUPPORT, UPDATES, ENHANCEMENTS, OR MODIFICATIONS. Other Notes: Insert year software was first published as well as any subsequent years when a modified version is published. Publication is defined in the U.S. Copyright Act as the distribution or offer of distribution of a work to the public by sale or other transfer of ownership or by rental, lease, or lending. Since some keyboards or fonts cannot reproduce the © symbol, the symbol (c) may be used instead, although the latter will not always be accepted as a substitute for the former. Use of the symbol “©” in combination with certain other requirements affords copyright protection in some foreign countries.
Happy April Fool’s Day from your friends at Themis Trading!