MARKETS - On the LeveL

FOR NEIL (WHIT) CONARY, president of the electronic trading system LeveL ATS, the summer was one big pool party. Investors may have been reeling from market problems, but LeveL, one of the so-called dark liquidity pools processing U.S. stock trades in addition to the major exchanges, saw a record surge in activity.

LeveL, which began trading in January, handled an average of 34 million shares per day in August, up 143 percent from 14 million shares per day in June. The system's gains came as late-summer volatility, fueled by tumultuous credit markets, prompted stock traders to seek the anonymity of dark liquidity pools like LeveL, which helps users find trading partners without revealing their identities or requiring them to post price quotes.

“市场波动绝对有助于我们的业务，”波士顿证券交易所的前楼层交易员盖罗说，在去年旋转速度之前的楼层开发的水平。

LeveL's volume dipped as volatility subsided in September, but the system still registered 21 million shares per day. That compares favorably with far more established rivals. The six-year-old crossing system run by Liquidnet Holdings, for instance, averaged 55 million shares per day in September, down from 64 million in August. (Overall volume for New York Stock Exchangelisted shares declined 25 percent from August to September; trading of Nasdaq-listed stocks across all market centers was down 18 percent.)

LeveL's most potent weapon is a bargain basement fee structure. LeveL charges users just 5 cents per 100 shares executed, a hypercompetitive 98 percent discount on the 2 cents per share charged by many competing alternative trading systems. It also boasts powerful backers. The system's owners -- Citigroup, Credit Suisse, Fidelity Brokerage Co., Lehman Brothers Holdings and Merrill Lynch & Co. -- provide it with a strong base of liquidity that improves its chances of having a match for customers' orders. LeveL has grown its client base from a handful of firms when it launched to more than 20 today.

“他们是那里最快的股东之一，”波士顿研究和咨询公司AITE集团的联合创始人兼董事总经理桑李说。

A further strength for LeveL is its variety of order types that let users trade big blocks as well as small lots. Unlike some dark pools, like Pipeline Trading Systems, which cross tens of thousands of shares per transaction, LeveL's average trade is just 350 shares. And its low commission rates are charged only to those who remove liquidity from the system; adding liquidity to the book is free. As a result, LeveL attracts lots of flow from algorithmic trading systems, which electronically split big orders into tiny pieces and seek the best prices on multiple trading venues.

"Their pricing is very competitive, very aggressive, and their fast, continuous crossing platform works well to attract algo trading flow," says Jarrod Yuster, global head of electronic trading at Merrill.

Conary, the man overseeing LeveL's impressive growth, spent 18 years running a floor-trading firm -- Ward, Conary and Murphy -- that he co-founded at the Boston exchange as a 26-year-old. After selling the firm to a rival, Conary served on the BSE's board of governors, which came up with the concept for LeveL. The exchange, however, had to spin off the budding ATS; as a self-regulatory organization that oversees the conduct of member firms, it could not legally own a registered broker-dealer. Once the current brokerage consortium purchased LeveL, the new owners asked Conary to head the fledgling organization.

So far he has positioned the start-up well for what many observers predict will be a consolidation wave among the myriad alternative trading systems -- more than 35 dark pools have been launched by big brokerage houses and small entrepreneurs alike during the past several years.

"In time most of the dark-pool market share is going to be consolidated among four or five players," says Lee, the Aite group analyst and consultant. "The rest will simply have to figure out how to survive."