Imported from previous forum
Will someone from this new Working Group provide a more detailed description of what it’s all about? It sounds interesting by name, but terms seem to always have a different meaning to different people using them. So ‘Algorithmic Trading’ means what to this Working Group and interested participants?
Thanks in advance for the explanation.
John Messmer
[ original email was from steve cook - steve.cook@orcsoftware.com ]
> Will someone from this new Working Group provide a more detailed
description of what it’s all about?
As mentioned by Himanshu Sharma, Algorithmic Trading involves using automated execution strategies, rather than manually calculating and placing single buy/sell orders. The main use in the industry is for brokers to offer particular advanced execution styles (eg. slicing orders over time, executing at VWAP, etc.).
So ‘Algorithmic Trading’ means what to this Working Group and
interested participants?
I believe that the main impact of Algorithmic Trading on FIX will be the need for support of execution strategies within the FIX order messages (New Order, Cancel, Replace, Execution, IOI, etc.). We should have a standard way for brokers to be able to communicate what strategies they support, and the associated parameters for these. Currently this is mostly done by custom tags within the New Order messages etc. but as these strategies become more popular it makes sense to standardise the way in which they are used.
cheers
Steve Cook
ORC Software
Tel: +852 2167 1953
As mentioned by Himanshu Sharma, Algorithmic Trading involves using
automated execution strategies, rather than manually calculating and
placing single buy/sell orders. The main use in the industry is for
brokers to offer particular advanced execution styles (eg. slicing
orders over time, executing at VWAP, etc.).
I’d say that the main use is not by/for Brokers. It’s mostly used investment banks, hedge funds, and such. Fx currency arb trading is a classic ex of blackbox/program/auto/algo trading.
I believe that the main impact of Algorithmic Trading on FIX will be the
need for support of execution strategies within the FIX order messages
(New Order, Cancel, Replace, Execution, IOI, etc.). We should have a
standard way for brokers to be able to communicate what strategies they
support, and the associated parameters for these. Currently this is
mostly done by custom tags within the New Order messages etc. but as
these strategies become more popular it makes sense to standardise the
way in which they are used.
FIX already provides a standardized order execution interface. Most exchanges provide a FIX interface that your applications/OMS can connect to. The edge in Algo trading lies in the algorithms themselves. Sharing strategies/algorithms by standardizing them will not be the industry focus.
It is absolutely no secret that in todays fragmented marketplace there are now a number of ALGO’s being provided by the Sell-side to give buy side clients some value added strategies for best execution. Providing these ALGO trading tools benefits both sides. By making these tools available it increases the sell-side Algo providers orderflow from buy-side clients such as Investment Managers, Fund Managers, etc. These clients will employ simple VWAP, TWAP, Basket-lists slicing, and Pegging to improve their execution price per fill. Its another way to gain more business from those institutions looking to get better prices per execution while getting more fees for those executions in return for better execution. In this spirit both sides win. Buy-side portfolio managers have been using ALGO’s for prortfolio rebalancing for quite some time. The real pros like Index, Stat, and ADR Arbitrage traders use more advanced programmed ALGO’s to automate calculations of statistical indicators such as FV (Fair value) in underlying securities where manual calculation would be cumbersome and prone to error in fast moving markets. The program Arb trader understands that once the ALGO is set and his program is optimized, its not prone to human error or emotion. Once set these Algorithms will perform as programmed.
I must agree that focusing on basic order execution FIX standards for Algorithmic trading would allow for much easier communication between the Algorythmic trading providers and the market center (execution venues) that support them. I also like the discussions about where Algo are used today.
As mentioned by Himanshu Sharma, Algorithmic Trading involves using
automated execution strategies, rather than manually calculating and
placing single buy/sell orders. The main use in the industry is for
brokers to offer particular advanced execution styles (eg. slicing
orders over time, executing at VWAP, etc.).I’d say that the main use is not by/for Brokers. It’s mostly used
investment banks, hedge funds, and such. Fx currency arb trading is a
classic ex of blackbox/program/auto/algo trading.I believe that the main impact of Algorithmic Trading on FIX will be
the need for support of execution strategies within the FIX order
messages (New Order, Cancel, Replace, Execution, IOI, etc.). We should
have a standard way for brokers to be able to communicate what
strategies they support, and the associated parameters for these.
Currently this is mostly done by custom tags within the New Order
messages etc. but as these strategies become more popular it makes
sense to standardise the way in which they are used.FIX already provides a standardized order execution interface. Most
exchanges provide a FIX interface that your applications/OMS can
connect to. The edge in Algo trading lies in the algorithms themselves.
Sharing strategies/algorithms by standardizing them will not be the
industry focus.