According to S3 chief executive Mark Davies, the router determines where to send orders based on historical best execution statistics that have been incorporated into an algorithm located in the router. Brokers designate S3 as the order’s destination in their own order management system and the algo and router do the rest.
“Broker-dealers are able to use real-time execution analytics to influence their routing decisions,” Davies said. “Our hosted solution gives clients seamless access to our advanced algorithms, real-time reporting, and multiple destinations–without necessitating changes to their back-office infrastructure.”
The algorithms automatically adjust, in real time, to the results of each trade, adapting the routing decisions to the client’s needs.
S3 currently connects to one options routing market maker, Wolverine Execution Services. But it has verbal agreements to join with two others. It is currently routing orders on behalf of one broker-dealer, but is also in dialogue with others. The firm is also developing the same technology for the buyside.