Autonomous Research: out of the dark

Independent research firm Autonomous Research has launched Sonic Dark, a new service allowing stock trading on 24 dark pools

What is Autonomous and what is its business model?

Autonomous Research was founded in 2009 by former Merrill Lynch analyst Stuart Graham, and is chaired by Lord Myners, the author of the 2001 report on equity research, ‘Institutional investment in the UK: a review’.

The firm, which has offices in London, New York and Hong Kong, initially sold research solely focused on the financial institutions group sector: banks, insurance and financial technology companies. The client group, which is capped at 100 members, pays fees depending on each client’s level of access to content and analysts.

Autonomous recently announced it was expanding its business into sales trading with the launch of a new dark pool trading service called Sonic Dark, where clients can buy and sell stocks and exchange-traded funds.

What’s a dark pool?

These trading platforms are called ‘dark’ because they’re operated separately from the central markets by exchanges, banks or brokers, and they allow shares to be traded anonymously. Their main advantage is to avoid the rest of the market knowing when there’s a sale of a large chunk of shares. According to estimates, about 13 percent of trading in European and US stocks is currently made on these dark pools, so that’s no small number.

What’s the regulator’s view on these trading sites?

SEC chair Mary Jo White publicly voiced her concerns about the lack of transparency on these venues, and several banks and brokers have been fined recently over ‘misused confidential client trading information’. A new regulation set out by European regulation MIFID II will introduce a cap on the proportion of a given stock that can be traded across all dark pools and which will be limited to 8 percent on a rolling 12-month basis.

With so many new research firms, exchanges or corporate access platforms cropping up, what’s Autonomous Research’s competitive advantage?

Like many other independent research or access platforms, Autonomous is hoping to cash in on the new unbundling rules that will come into effect in 2017 and which will mean asset managers have to pay separately for research, corporate access and trading services. Until now, investments banks have been giving research and corporate access services ‘for free’ to their clients, so the pricing of research as a stand-alone is a big issue. Autonomous has been selling pure research and therefore knows how to price that service and the trading commissions separately.

It believes that with the unbundling, clients will be selecting trading services based on the quality of execution provided. In addition, one of the founders highlights that the dark pools that are accessible via the Autonomous platform have been thoroughly assessed.

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