Latest Blog Posts

Pair Trading: It’s Complicated – Part III: This is not your standard algorithm

Mike Baradas, Bloomberg Tradebook

May 24, 2016
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Implementing multi-asset and cross-asset algorithms presents substantial workflow challenges for many institutions.  Bloomberg Tradebook’s PAIR Multi-Asset platform provides a comprehensive solution to electronically integrate with OMS’s and EMS’s in the marketplace. In our previous posts, Part 1 and Part 2, we illustrated the mechanics of cross-asset and pair algorithms.  While a broad range of institutional investors are trading multiple asset classes in cross-asset strategies, a good number of them are challenged with certifying the algorithms into their standard OMS and EMS workflows. read more

Bumpy road ahead?

Steve Grob, Fidessa

May 20, 2016
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Interesting story in the FT today about IEX and its application to become a fully-fledged exchange. At issue is IEX’s so-called ’speed bump’ that will slow down the HFT ‘boy racers’ and so make markets safer again. Naysayers claim that the inclusion of a speed bump is contrary to the rule that investors should have “immediate” access to the best liquidity. The SEC counters that anything that is sub-millisecond (such as in this case) is, in effect, “immediate”. read more

Apple shows the way for trading systems

Steve Grob, Fidessa

May 12, 2016
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Interesting to read that Apple is reportedly deciding when, not if, to cancel music downloads from iTunes.  The idea, of course, is to move everyone over to its Apple Music streaming service.  This got me thinking about the whole “access to” versus “ownership of” debate and how it applies to our industry.  As a committed audiophile, the Apple story filled me with horror as I thought about how I have curated my music collection over the years and, more importantly, the sound quality of streaming services compared to playing them through my dual DAC player. read more

Sizing Up: The New Trade on the Block

Kapil Phadnis

May 09, 2016
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From the onset of Regulation NMS in the U.S., much of the market focus has been on assessing average trade values and sizes. Average trade sizes are widely used to measure proliferation of algorithmic trading and electronic market makers. The connotation when using this measure is that the volume is being chopped into smaller units and institutional investors seeking large executions are being disadvantaged. Market makers drive smaller trade sizes since it is less risky for them to buy and sell smaller units by capturing as much spread as possible each time they trade. read more

Phew! No more HFT for me

Christian Voigt, Fidessa

May 06, 2016
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Some might remember the surprise, back in March 2012, when it became apparent that an individual personal trader could end up being classed as a high frequency trader (HFT) under MiFID II. Admittedly I’m quite proud of my 10 finger touch-typing skills, but I wasn’t sure whether my ability to type really fast could be held against me one day. Finally, after four years, the European Commission published the draft delegated acts last week confirming the new HFT definition. Happy to report that the final definition is much more sensible than once feared – click here for a quick summary. read more

Will the Buy-Side Become Fixed Income Liquidity Providers?

Ivy Schmerken, FlexTrade

May 04, 2016
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Buy-side fixed income traders are prepared to play a more active role as price- makers on electronic trading platforms, as liquidity constraints have pushed them to redefine their role. Institutional traders at Markets Media’s Fixed Income Trading Summit on April 21 agreed that “behavior change” is necessary in light of sell-side firms reducing their market-making capacity and cutting their inventories of bonds. Experts have been concerned about a potential liquidity crisis in the $8 trillion corporate bond market because of the growth of new corporate bond issuance, which has been in excess of $1. read more

One million Fragulators can’t be wrong

Steve Grob, Fidessa

May 03, 2016
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I don’t often write about fragmentation these days, but I noticed this morning that our frag counter surpassed the 1 million mark. To be honest I was planning to write something later in the week, but thanks to a certain university in Italy that slurped its way through 15,000 fragulations at the weekend, I am a bit off the pace. I have to admit that when we first launched the site back in 2008 we had no idea of the success it was going to have, nor how diverse the community was going to become stretching across venues, brokers, investment managers, regulators and academics around the world. read more

Pair Trading: It’s Complicated – Part II

Mike Baradas, Bloomberg Tradebook

Apr 27, 2016
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Pair and cross-asset algorithms seek market neutrality by using correlation as a key factor to managing multi-security executions.  In our previous post, “Pair Trading: It’s Complicated – Part I,” we differentiated the parameters of cross-asset algorithms from standard single-stock or list algorithms. We will now explore the inner-workings of these pair algorithms in more detail. To do better than the current market: buy lower in one leg, and/or sell the other leg higher, the algorithm needs to do better than just sending market orders in both securities. read more