Top stories

Tora integrates Markit TCA tools into OMS

Oct 30, 2014

TORA, the leading provider of advanced trading technology and financial services, today announced a partnership with Markit to integrate Markit's pre and post trade transaction cost analysis (TCA) tools into its Execution and Order Management System.

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Nasdaq and Shenzhen Stock Exchange Sign MOU

Oct 29, 2014

SEOUL, South Korea -- Nasdaq (Nasdaq:NDAQ) and Shenzhen Stock Exchange (SZSE) signed a memorandum of understanding (MOU) at the World Federation of Exchanges' annual General Assembly to strengthen cooperation and promote mutual development between the two exchange companies. SZSE's Chairman, as well as Nasdaq's Vice Chairman Sandy Frucher and Executive Vice President and Head of Market Technology Lars Ottersgård were present at the signing ceremony.

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smartTrade Launches End-to-End Solution to Automate Fixed Income Flows

Oct 28, 2014

New York, London, Tokyo, Aix-en-Provence (France) - smartTrade Technologies, a global leader in sophisticated cross-asset liquidity management solutions, today announces the launch of a new end-to-end trading solution designed for Fixed Income and OTC derivatives businesses. smart-FI is available immediately and will appeal to both sell and buy side institutions looking to electronify and re-vamp their Fixed Income infrastructure.

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Latest Blog Posts

An Early History of High Frequency Trading

Gary Stone, Bloomberg Tradebook

Oct 23, 2014
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As students of history, we would like to refer you to Bob Pisani’s great read on the early history of high frequency trading in “Plundered by Harpies: An Early History of High-Speed Trading,” Financial History, Fall 2014. Mr. Pisani dates U.S. high speed trading back to the 1790s when speculators, using their information advantage that the Federal Government was considering assuming the old debt of the states, rented fast boats to go down south and purchase the state’s bonds which were trading around 10% of par value. After the Funding Act of 1790 was passed, the bonds rallied. He then walks through history discussing how traders leveraged subsequent technological advancements gain a competitive advantage.
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Is Turkey voting for Christmas?

Steve Grob, Fidessa

Oct 23, 2014
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The recent announcement from BATS Chi-X Europe that it intends to list Turkish stocks got the phones ringing here at Fidessa Towers. Both local Turkish brokers and pan-European houses wanted to know if, how, and when Turkish stocks might fragment like their European counterparts. A colleague mentioned to me that surely the local Istanbul exchange and its immediate members would prefer just to keep the cosy status quo in place and would not welcome direct competition from across Europe. An understandable view, but the truth is somewhat different. First of all, multi-market trading is pretty much inevitable and so embracing and preparing for the change is the sensible option. Second, local Turkish brokers will be able to trade the complete pan-European BATS Chi-X stock universe as a one-stop shop – something that their domestic clients will surely welcome. Finally, the fact that Turkish stocks can be traded directly in London shouldn’t detract from the brokers’ real skill which is their understanding of the names involved and the subtleties of the broader Turkish market. Those firms that understand this have nothing to be afraid of and, potentially, everything to gain.
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Breaking The Habit

Ofir Gefen, ITG

Oct 17, 2014
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As everyone trading Asia Pacific markets will tell you, managing performance and finding liquidity are significant challenges, particularly in small and mid cap stocks and in emerging markets. While some of this is inevitable due to macro investment factors and market microstructure, drilling into the detail suggests that this could still be improved by changing one aspect of habitual trading behavior – the use of VWAP or participatory strategies to spread orders based on volume profiles, rather than taking blocks of liquidity when they become available. VWAP was the dominant benchmark for institutional trading globally for many years, but based on increased use of TCA tools and a focus by fund managers on absolute trading costs and their impact on fund performance there has been a shift to adopt IS (arrival price) benchmarks.  In Asia we have seen this particularly over the past five years. IS is now widely seen as a better method to align the trading performance with the overall fund returns. However, although the use of the IS benchmark has grown, the correlation to adopt IS trading strategies instead of VWAP to actually execute trades has not been 1 to 1.  Given low liquidity in many Asian stocks, traders often prefer to stick with the comfort of VWAP or volume-based strategies in one form or another. There is also the concern that getting done at one price too early may result in a bad performance outcome if the price moves in your favour later in the day, so sticking with volume is taken as the risk-averse approach. Nevertheless, trading with volume using VWAP or a participatory strategy often results in extended completion times, particularly for larger orders, and could harbor a far greater risk that the price will move away from the IS benchmark due to this delay. In today’s Asia markets there are now liquidity tools that enable traders to get the ‘best of both worlds’: quick completion to minimize delay costs, while still managing market impact.  Traders who recognize the problem are increasingly turning to block crossing tools such as POSIT Alert, to find liquidity in size quickly, and at a fixed mid-point price which prevents adverse price drift and higher overall trading costs. Analysis shows that executing a block in POSIT Alert® is on average 32bps cheaper than the expected impact and spread cost of executing a similar size order of that stock in the market. When applying the analysis to small cap names, the average cost savings rises to over 50 bps; and when analyzing orders executed that are larger than 10% of ADV, we measure an average of 40bps savings. The key takeaway for traders? If a) you’re benchmarked to IS or b) your goal is to reduce absolute trading costs by getting a result that’s close to your portfolio manager’s decision price, taking advantage of blocks as soon as they become available normally gives you a much better outcome than spreading your order out along a volume horizon.  The benefit is even greater for mid and small cap stocks, or orders larger than 10% ADV. Traders that already realize this are changing their habits – this can be seen in the distribution of the stocks actually crossed (Q4 2013 – Q2 2014) in POSIT Alert. While the lit market typically trades about 60% large caps, 25% mid caps and 15% small caps, and dark aggregation tools get success mostly in large caps, the majority of POSIT Alert blocks are in mid (42%) and small (23%) caps. Breaking the VWAP habit and having the confidence to take block liquidity at mid-point as soon it’s available, particularly in an illiquid name or larger order size, should help traders manage some of the highest costs associated with the Asia Pacific markets.  As investment interest in Asian mid and small caps grows, this will be particularly important in the overall context of fund returns.
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Interview

Discussing Risk Data Strategy: An Interview with Philip Chamberlain

Sep 04, 2014
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Risk data is an area that has been largely overlooked for many years. Today the situation is different and the area is facing increasing regulatory scrutiny, as Systemically Important Financial Institutions (SIFIs) rush to comply with the Basel 239 Principles for Effective Risk Data Aggregation and Risk Reporting. An enterprise’s success depends on its ability to analyze risk data efficiently and effectively, in ways that uncover both risks and opportunities. Being able to extract and escalate critical risk information is nearly impossible without a robust risk management framework supported by a strong technology infrastructure.

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ATMonitor talks to ITG's Ian Domowitz about Best Execution

Jul 17, 2014
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Ian Domowitz, Managing Director of ITG and CEO of ITG Solutions Network, talks to ATMonitor about transparency in terms of institutional trading and how Best Execution can be achieved across different asset classes.

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ATMonitor talks to ITG's Ian Domowitz about Big Data and TCA

Jul 09, 2014
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Ian Domowitz, CEO of ITG Solutions Network, talks to ATMonitor about the problems surrounding Big Data in terms of real-time TCA. Domowitz discusses the main issues including the volume, the variety and the velocity of the data.

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Survey

How the buy-side rates broker services in 2014

Launch of The TRADE's inaugural Broker Services Survey - we are asking our buy-side readers to help us by completing a short questionnaire to summarize their broker relationships; which brokers they use and what those brokers are good at. Because we know that many traders use a large number of brokers for different reasons we are deliberately restricting the evaluations to six core criteria and allowing respondents to offer responses at a global, regional or market level as they define their relationship. The result is intended to be more than a simple nomination (who do you use) but far from a detailed assessment of capabilities, which we consider would be unmanageable for many traders. Please click here to participate.

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Research

The Cost Of Liquidity In The FX Market

ITG

Oct 27, 2014
The Cost Of Liquidity In The FX Market

On July 3, 2013, the courts pronounced caveat emptor with respect to execution performance in the FX market. U.S. District Judge Denise Cote threw out a lawsuit, which accused JPMorgan Chase & Co. of breaching a fiduciary duty to custodial clients by charging “hidden and excessive mark-ups” on currency trades. Judge Lewis Kaplan dismissed a lawsuit directed at officials of Bank of New York Mellon, for ignoring “red flags” or knowing that trades were being processed at the worst or near-worst prices of the day.

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Video showcase

Corvil working with RSJ

Corvil Watch Michal Sanak, CIO, RSJ Algorithmic Trading discuss working with Corvil. read more

Corvil working with Tradition

Corvil Watch Yann L'Huillier, CIO, Tradition and Alex Krovina, CTO, Tradition discuss working with Corvil. read more

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