BUSINESS PROFILE | BLOOMBERG TRADEBOOK
to buy Microsoft stock
while it is underperforming
the S&P 500 during
the day. Generally, the
expectation in such a
strategy is that the stock
will revert to its historical
relationship, tracking
or outperforming the
benchmark in the future.
Executing this strategy,
buying a security relative
to a benchmark, can
easily be done with
Tradebook’s Relative
Benchmark algorithm.
Bloomberg’s real-time data
nourishes the algorithm
to execute these
sophisticated multi- and
cross-asset strategies.
The PAIR Multi-Asset
platform models and
algorithmically executes
two or more securities
based on a user-defined
relationship formula, such
as a spread or ratio.
In the Relative
Benchmark algorithm,
only one security will
be executed by the
algorithm, at price levels
relative to a benchmark,
as defined by the trader.
The benchmark does not
need to be a tradable
security, which lets you
choose from a broad
Source: Bloomberg Tradebook
range of tickers for such
strategies.
For example, to execute
a trade based on how
Microsoft is trading in
relation to the index, run
PAIR and launch the
Equity/Benchmark ticket.
In the Pair Strategy ticket,
select ChgOnDay as the
Price Convention. For the
Leg 1 security, select
Buy as the Side and for
the Leg 2 Benchmark,
enter SPX in
the Ticker field. For Leg
1 Shares, enter 10,000.
To buy MSFT
while it is underperforming
the SPX, enter 40 basis
points in Spread (bps). The
algorithm will dynamically
adjust your MSFT
working price limit. Select
Strategy Bsmart with
Aggressive Level NORM
and then Activate to start
executing your strategy.
Many fund managers
and traders execute
their trades relative to a
benchmark. With the right
tools, they can automate
the process with a relative-
value algorithm. Doing so
may help generate the
alpha they’re looking for. ■
Winter 2016
TheTrade
31