PureStream’s Founders on the Recently Launched PureStream ATS

Today, PureStream Trading Technologies Inc announced that it selected Nasdaq to power its new PureStream alternative trading system (ATS) via the Nasdaq Execution Platform.

PureStream, which will offer brokers and their institutional clients greater bandwidth to get more liquidity faster, more cost-effectively and with greater security, is on target for a Q2 2021 launch, subject to U.S. regulatory approvals.

We spoke with Sean Hoover, Yogesh Wagle, and Armando Diaz, PureStream’s founders, to learn more.

This morning you announced the launch of PureStream’s new alternative trading system (ATS) via the Nasdaq Execution Platform. Can you tell us about PureStream? How did it come to life, and what is your mission?

Sean: PureStream is a new way for institutional brokers to source liquidity. Generally speaking, the markets’ price discovery is excellent, but the liquidity discovery process for institutions can be improved upon. The growth in electronic trading has greatly increased the amount of natural liquidity that is being governed by an algorithmic execution strategy. As an unintended consequence, institutional natural liquidity has become latent, unfindable, and uncrossable because it is constrained to market volume trading in the future. 

Yogesh: Our solution, the streaming block, has the match characteristics of a block, but the price discovery of an algo execution. A streaming block enables the crossing of the currently latent algorithmic liquidity, consistent with each strategy’s volume constraints.

PureStream has a unique market model. Can you talk a bit about your approach and how this is helping PureStream to differentiate?

Armando: We are fundamentally unique in that we are matching orders on a different basis than price & time-based venues. Institutional liquidity isn’t reliably available in a single trade anymore, but there is a lot available in the algorithms. Our streaming block is an open-ended, bi-lateral match, governed by a percentage rate we call the liquidity transfer rate.  

We also prioritize our order book differently. Our order book is sorted by what institutions are seeking – liquidity. Liquidity is a rate – how much volume can you access over the total volume trading within a unit of price change. In addition to using rate to prioritize, we use the size and marketability of the order to prioritize the order book. In our market, the better the liquidity, the higher the standing, regardless of when the order arrived chronologically. 

Lastly, we derive our price discovery from both the NBBO and each individual trade reported to the SIP. By referencing the SIP, and not solely on the NBBO, the brokers using PureStream will have several key advantages in solving for slippage, latency disadvantages, and liquidity fragmentation.

What opportunities will PureStream provide to brokers?

Sean: We have a better process for a subset of liquidity situations that significantly increases the bandwidth of liquidity transfer between institutions, but the value of this is dependent on how the broker dealers’ algorithms apply the incremental speed and throughput. Two key points 1) the speed we enable relates to the parent order completion speed, not trade latency speed of the child order 2) increased speed and throughput can be applied many ways, including greater price sensitivity. A low-impact algo that yields 2% of a day’s volume may be even less impactful if it was 8% of the volume for 25% of the day and was not in the market for 75% of the day.

What role will Nasdaq play in rolling out the PureStream platform?

Yogesh: Nasdaq Technologies is our key partner in executing our vision. The technology framework is world-class in terms of performance, but its flexibility to adopt to our protocols is astonishing. In addition to the technical and time-to-market advantages, one cannot underestimate the credibility it provides for us to the institutional broker-dealers, buy-side and regulators. We are tremendously grateful for the opportunity to be working with the Nasdaq Technologies team.

What excites you about the future, and is there anything forward-looking that you can share with our audience?

Armando: A year ago, the three of us were the three most knowledgeable people regarding streaming blocks. Today we aren’t in the top 20; the point is, as more of the institutional trading community thinks about the applicability, the more exciting the future. The advent of broadband internet wasn’t exciting in and of itself, but what innovators were able to do with it was, we think something similar is shaping up in equity trading. A great example is a Quant HF that knows there are alpha’s that their execution strategies can’t capture today that they may be able to soon via new execution strategies the brokers leveraging our order types will provide them.

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