Blue Ocean Technologies is migrating its technology to a platform provided by MEMX, the US equities and options exchange operator, as the venue providing overnight trading of US stocks looks to extend its operating hours, grow volume and expand further in Asia Pacific.
Brian Hyndman, president, and chief executive of Blue Ocean Technologies, said volumes increased every month in 2023 and more people signed up to receive market data. In June last year Blue Ocean said it crossed a landmark of 1 billion shares traded since the start of 2023.
Brian Hyndman, Blue Ocean
He told Markets Media: “We are super excited about where we are going in 2024 and have announced a new technology partnership with MEMX. We are convinced their technology is the right fit for Blue Ocean as MEMX uses it for their equities exchange and it has the reliability, stability, redundancy and compliance features that we need to take us to the next level.”
The aim is for the Blue Ocean ATS to migrate to MEMX technology in the early part of the second quarter this year according to Hyndman.
Blue Ocean clients can trade US National Market System stocks between 8pm and 4am ET from Sunday to Thursday, which allows Asian investors to buy and sell US stocks during their trading day. Hyndman said the venue is getting many requests from Asian customers to expand its trading hours to include pre-opening and post-closing in the US and Blue Ocean is actively working on the extension this year, which is subject to regulatory approval.
“After the migration we will be much more scalable and it will solve compliance issues for us as we grow,” Hyndman added. “It could give us other ways to get into the pre- and post.”
The majority of Blue Ocean customers are retail investors but the technology migration will help attract institutional investors, according to Hyndman.
“The migration will give us the ability to go after more sophisticated customers, such as high frequency traders, who demand a high level of reliability and stability” he added. “We are laser-focused on executing the technology roadmap.”
Jonathan Kellner, MEMX
Jonathan Kellner, chief executive of MEMX, told Markets Media that the firm’s ability to operate 24/7 and the ability to implement the technology in a short time period were really important, because Blue Ocean has seen tremendous growth. MEMX has described its technology platform as asset class agnostic, and as having the ability to decouple transaction, data and messaging from any implementation specific business constructs or logic while supporting client defined operating hours and market sessions.
“We have to change some features for Blue Ocean but we have been in talks with them for a little while so we are prepared, and credit to our team who can turn things around very quickly,” added Kellner.
He highlighted that MEMX had provided similar technology to EDX, a venue for digital assets, in six months so the firm has the ability to deliver pretty quickly. Other exchanges are also technology providers, but Kellner argues that a big differentiator for MEMX is that it runs the same technology that it licenses.
“It is a new technology that we built from scratch, which we think is unique,” said Kellner. “We have the ability to run 24/7 and it is multi-asset so clients with growth plans have flexibility.”
MEMX runs highly regulated equities and options exchanges, so Kellner argued that the firm also has experience from a reporting and monitoring perspective. Regulated exchanges also have responsibilities with regards to preventing outages and Kellner said MEMX has built resiliency and recovery using a mesh network to make sure that there are backups to prevent outages.
“The amount of volume that MEMX is doing in equities and options shows that our technology has the ability to scale,” Kellner added.
MEMX’s equities exchange averaged 3% market share throughout 2023 according to the firm, and reached 5.3% last December. In the last three days of December, MEMX Options had over 1% market share, after launching last September.
Growth plans
When Hyndman joined in 2021, Blue Ocean was trading exchange-traded funds and then moved into single stocks . He said that Blue Ocean now typically trades 4,200 stocks in any given month.
“Back in December we hit a high watermark of 110 million shares overnight, single-counted, but the average is closer to 40 million ,” he added.
One of the reasons for the growth in volumes is the increase in the number of brokers connected to the platform, such as Interactive Brokers who joined last year. On 13 February this year Blue Ocean announced a partnership with DriveWealth, a fintech delivering financial services through its “Brokerage-as-a-Service” platform.
DriveWealth will provide its global B2B partners extended real-time access to equities trading and trading data on the Blue Ocean ATS platform , while Blue Ocean will also grow its connectivity among the DriveWealth markets in Asia-Pacific and other global regions.
Michael Blaugrund, DriveWealth
Michael Blaugrund, chief executive of DriveWealth, said in a statement: “DriveWealth’s connectivity to Blue Ocean enables our global partners to offer real-time execution 24 hours a day, including seamlessly transitioning from overnight to core trading hours.”
In 2023 the Tokyo Stock Exchange also acquired a stake in Blue Ocean and Hyndman expects more trading volume from Japan this year. Blue Ocean also has partnerships with brokers in South Korea and Hong Kong, and Hyndman said the firm is also reviewing Australia and India.
“2023 was a really tremendous breakout year,” said Hyndman. “The pipeline is strong and I think we can see similar growth in 2024.”
