The growing importance of anonymity


The TRADE’s 2015 Survey of Algorithmic Trading is well underway. As always it will provide a unique snapshot of what is important to clients, as well as how they see their brokers.

As the industry matures, differentiation is ever harder to sustain. Knowing what counts for clients is a key to success and in recent years that has been preserving the anonymity of client orders – thereby helping reduce market impact. Indications suggest that anonymity will once again feature high on the list of client priorities this year as well.

The problem with anonymity is obvious in the name. Success is by definition hard to see, but failure is all too clear to market and hence the buy-side client. There is no doubt that detailed analysis of individual fills, by venue and time, can provide clues to both success and failure. But time is in short supply on any buy-side desk and analysing every trade at such a detailed level is probably not practical nor in many cases economically justified.

However it does not all have to be about analysis. Experienced traders do not have to study the details of the tape to know when their order has been recognised. They also know which orders are vulnerable to being identified and which brokers have both the reputation and business to prove that they do a good job at protecting their clients’ interest. The scores in the Survey reflect those assessments.

As such they provide a good guide to the qualitative assessments being made and adjusted every day by knowledgeable traders based on their actual experience. Reputations may take a long time to establish but they are all too easily forfeited in the face of any mistake.

Early indications suggest that Anonymity is even more important to clients responding to the Survey this year than in 2014. They also show that Instinet will again be a strong performer in this category as it was in 2014. Morgan Stanley is also showing prominently in the early returns.

To make sure that your experience and opinion is reflected in the Survey, click HERE and register your scores.