20 – 26 JUNE 2013
TRADING FIRMS
ITG brings transparency to algorithmic trading strategies
TG is going to offer a new capability to provide clients with an improved understanding of their algorithmic trading strategies, the firm announced last week. The web-based platform, ITG Prism, allows clients to peer inside the performance of their algos to see how they behave in real-time and also predict future behavior, said Jeff Bacidore, managing director and head of algorithmic trading. Bacidore explained a trader can place an order in a volumeweighted average price (VWAP) algo and be told what it will do in terms of volume scheduled, but also see where orders, sub-orders and child orders are going. As the algo moves from location to location, Prism will plot where orders are sent, filled and whether they are aggressive or passive, he added. “Clients have always wanted this level of granularity,” said Bacidore, adding that demand has been increasing for availabil-
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ity of the data in real time. Where orders would previously be put into a black box and traders waited for fills, they can now see what the expected behavior is and, if there is any deviation, receive an instant explanation as to why, he explained. “It shows not only what you are doing, but what are you thinking of doing,” he added. Prism is the result of an initiative the firm undertook about a year and a half ago to see how its technology could be enhanced to meet client needs, according to Bacidore. ITG spent about nine months building the offering, he added. The platform is accessible through a web client and is a free add-on for all ITG clients, Bacidore noted. “Clients want cutting edge algos, but they also want more info about what the algo does.” The offering is a step ahead of how traders used to place orders, Bacidore said.
MARKET STRUCTURE
Sell-side execs talk order type, dark volume reviews
Some sell-side executives are open to a constructive review of available order types and broader availability of dark pool activity data, according to executives speaking at a TABBForum event last week in New York. In a one-onone conversation with Larry Tabb, JONATHAN CEO and founder KELLNER of the TABB regional head of the Americas at Instinet Group, Jonathan Kellner, regional head of the Americas at Instinet, said the market could do with a review of available order types with an eye to limiting the number of order types on offer. “The amount of order types we have just doesn’t make sense, and
I think the regulators took their eyes off the ball in just allowing order types to be put out there,” he explained. He noted that while variety is good, a review is warranted. “It becomes expensive to deal with these order types, let alone make sure you’re protecting your client, let alone understand how your order is interacting with all the order flow.” In a separate panel, David Weisberger, executive principal at Two Sigma Securities, said dark pool data should be more widely available. “Why wouldn’t the first thing we do be to implement a rule that says all exchanges and ATSs… tell us what percent of their volume is traded against lit and dark liquidity?” he asked. The disclosure could be aggregated on a monthly basis, he conceded but he said making the data available would respond to demand. “We were actually close to this three years ago except, as an industry, we became distracted by a series of unfortunate events, so we kind of lost the thread of the concept.”
EXCHANGES & ATSs
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Eris contract size reduction supports more accurate hedges
Eris Exchange’s move to reduce the notional size of its swap futures contracts will support more accurate hedging activity for end users as the firm looks beyond the pending June 10 phase two clearing mandate, according to comments from one buy-side trader. The futures exchange, which offers trading of US dollar-denominated interest rate swap futures, announced last week it had reduced the notional size of its contracts from $1m to $100,000. Eris cited the move as a response to demand from end users that wanted more granularity for the allocations process. Michael O’Brien, head of global trading at Eaton Vance, agreed, but added that hedging strategies also require more precision, even in a larger