In a white paper unveiled on 10 September, EdgeTrade claims that those traders who adopt the agency-only broker’s ‘smart order execution’ algorithms are more empowered than those ‘struggling with the ‘dumb’ technology of smart order routing (SOR).’ "The many traders who have quickly and aggressively adopted smart order execution are those who realise they now have it within their grasp to tap sub-second shifting liquidity regardless of where it may reside, be it in dark pools, public markets or a combination of both," comments Kyle Zasky, president, EdgeTrade.
The white paper, entitled 'From Fragmentation to FAN: Intersection of Reg NMS/MiFID, Dark Pools and Charting a Clear Path to Actionable Liquidity', is co-authored by Zasky and the firm's CEO, Joseph Wald.
"There is a huge difference between SOR and smart order execution," remarks Zasky. "The term SOR was coined six or seven years ago when market fragmentation came about with the advent of electronic communication networks (ECNs).
"'Smart order execution' algorithms are a new type of algorithm that take an adaptive rather than a linear approach to buying and selling stocks. When a trader sends an order to multiple destinations simultaneously, they make certain assumptions about those destinations. If they make the wrong choices, 'smart order execution' algorithms instantaneously adapt and re-route the orders," continues Zasky.
What differentiates these algorithms from SOR technology is the level of routing logic that underlies them, according to Zasky. "You would think every provider offers algorithms like this but there are no algorithms in the market with the level of sophistication we have introduced," he comments.
According to the report, EdgeTrade's FAN algorithm – which stands for 'find and nail' – is a 'quantum leap ahead of algorithmic technologies, given its ability to process as much as ten times the volume of message traffic as a typical smart order routing tool, in milliseconds.'