BUY SIDE

Buy-side seek algos to measure info leakage

ITG survey finds buy-side want more outcome-focused reporting algos.

By Hayley McDowell hayley.mcdowell@strategic-i.com March 10, 2017 12:27 PM GMT

Buy-side traders are seeking more outcome-focused reporting algorithms with the ability to measure details on information leakage.

A poll of 70 buy-siders, carried out by ITG, found 73% are looking for ways to acquire details on possible information leakage through the use of algorithms.

Over 60% of respondents agreed algos should be more transparent and include strategies which are easier to understand.

The majority of buy-siders agree the standard algos provided by brokers have room for substantial improvement, although just 24% said they send more than half of their daily order flow to custom algos.

A report by Greenwich Associates found just 7% of buy-siders are satisfied with the standard broker algos used for trading, with many expressing the need for algos to be customisable to suit trading style.

Richard Johnson, vice president for the Greenwich Associates market structure and technology group, explained customisable tools are becoming increasingly important to buy-side traders.

He said it’s important buy-siders “can customise algos and risk controls and manage access to venues when executing—through algos and high touch trades alike.”

ITG’s survey found 39% of buy-siders want to see algos adjust based on a trader’s execution history and investment style.

Ben Polidore, ITG’s managing director for algo product management, explained the firm is making key investment in its algos, focusing specifically on its implementation shortfall algo.

Don’t forget to rate your algo provider in The TRADE’s 10th annual Algorithmic Trading Survey.