Bank of America Merrill Lynch (BAML)

All of BAML’s algorithms source liquidity via the firm’s smart order router (SOR), which accesses both lit and dark liquidity. The firm also offers BlockSeeker, a dark-only algorithm that only executes in external dark venues and the firm’s internal crossing network, MLXN.

Access

BAML’s Global Market Structure group monitors flow on all primary and alternative trading venues; however, this is irrespective of the firm’s decision to connect to a particular trading destination. BAML connects to venues based on trading volumes and client demand.

Liquidity interaction

BAML’s SOR is generally based on order size and expected probability of fill. The algorithms also send out immediate-or-cancel order instructions to dark venues before interacting with the lit market. The SOR dynamically posts between venues to determine where to post and how to divide the order between venues. This includes intelligently splitting between dark and lit venues to help reduce market impact.

Anti-gaming logic

BAML anti-gaming logic uses a combination of volatilitybased limits, minimum quantity parameters and ping detection. The firm also offers an automated minimum cross size, which is calculated based on an individual stock’s trading characteristics.

Customisation

Clients know the venues they have executed on and whether it was as a lit or dark fill in real-time via FIX. The firm’s Execution Consultancy group also offers a detailed report on trading performance and venues used for execution.
Clients can customise algorithms, for example, defaulting dark blocks but also the ability to opt out from dark venues if necessary.

Service and reporting

The algorithms are available on various execution management systems and portfolio management systems.

Future plans

BAML has recently launched a new flagship algorithm, Instinct. The algo incorporates dynamic signalling and new intelligence, and trades to an implementation shortfall benchmark.