Algorithmic Vs Program Trading

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Imported from previous forum

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Hi All,

am new to the Financial Domain and trying to build my fundamentals.

i want to know:

1> What is the difference b/w Algorithmic and Program Trading?

2>How does FIX support these trading mechanisms?

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  1. Similarities of algorithmic and program trading:
  • Both can use similar trading algorithms to execute the orders, for example, VWAP.
  • Both can accept client orders via FIX messages

Differences: (in general)

  • Program Trading will have a program trader monitoring your executions and may take over by manually executing the orders in some cases where the trader feels that he/she will add value.
  • Algorithm trading is normally executed by a strategy without any human intervention. (no-touch)
  • Cost: Program trading in general will cost more that algorithm trading.
  • Orders sent via FIX messages for program trading will general be acknowledged by a program trader. Algorithm trading will be acknowledge by a system.
  1. There are many ways FIX can support these trading mechanisms, however, the most popular way is to work with the client to understand their system’s capabilities. In some cases, the broker and the client will work together to understand what values should be defaulted vs. variables. For example, the client may want to set the volume participation value based on his/her own assessment of the liquidity of a particular stock.

Regards.

Hi All,

am new to the Financial Domain and trying to build my fundamentals.

i want to know:

1> What is the difference b/w Algorithmic and Program Trading?
2>How does FIX support these trading mechanisms?

4

Hi All,

am new to the Financial Domain and trying to build my fundamentals.

i want to know:

1> What is the difference b/w Algorithmic and Program Trading?

Algorithmic trading is a trading where orders are executed ( worked ) by strategies ( Automated program)

Program Trading is a block trading where a client send lot of orders in one List and expects sell side to execute them by program trading system ( system which can work on mulitple order at the same time )

Program trading system also uses Strategies ( Algo) to execute the orders

  1. How does Fix Support these trading mechanism

    … it depends upon company to company , vendor to vendor
    For Algorithmic trading , you can use CUSTOM tags from 6000 to …
    where you can spacify various parameter for strategies ( Start time , end time , Aggression level , Display … etc )

In terms of Fix if you want to support Program flow , you may need to provide functionality of List Message in your Fix Infra and it should pass List Message to downstream Program Trading system