BofA Merrill Lynch Rolls Out High-Frequency Powered Trading Platform

Bank of America Merrill Lynch (BAC) has launched a high-speed system for electronic stock trading, built for the bank by a high-frequency trading firm.

The platform, called BofAML Express, aims to provide rapid connections to U.S. securities exchanges alongside new risk control measures now required by the Securities and Exchange Commission.

The system was designed by Thesys Technologies LLC, a New York-based subsidiary of Tradeworx Inc., which runs its own high-frequency trading strategies.

"We were looking for a company with experience in high-performance technology to build a platform to our specifications that would give us an edge in the marketplace," said Michael Lynch, head of execution services in the Americas for BAML.

Quantitative trading firms doing business through the bank are early users of the platform, though ultimately the capabilities are expected to be picked up by other, less technology-intensive customers.

The system already is up and running, with the activity running through the platform estimated to make up 2% to 3% of daily U.S. stock trading on average, Lynch said. About 6.7 billion shares have traded per day over the first half of July, according to research from Raymond James Financial (RJF).

Beyond share-trading, BAML intends to next apply the system to futures, and later markets in Europe and Asia.

Thesys launched in 2009 as a way for Tradeworx to leverage the technology built to power its own automated trading activities. The unit stands among a range of efforts by private trading groups to develop customer-facing businesses in a bid to diversify beyond buying and selling securities and derivatives contracts.

Other automated trading firms have offered for sale trading algorithms backing their own strategies, or are exploring ways to facilitate the orders of retail-level investors.

Key to the BofAML Express platform is the ability for users to have their trades overseen by fast-acting risk monitors, ensuring that any one customer doesn't build up a too-large position or enter a wildly outsized order.

The SEC this month began requiring some such controls for firms accessing U.S. markets through a broker, seeking to clamp down on electronic traders gaining unsupervised access to exchanges. A full range of checks are expected to be in place by the end of the year, covering bond markets alongside equities.

The BAML platform allows risk checks to be done and orders to be carried out in less than 10 microseconds, according to the company. A microsecond is one millionth of a second.

-By Jacob Bunge, Dow Jones Newswires; 312 750 4117; jacob.bunge@dowjones.com

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