Instinet, an agency broker and wholly-owned subsidiary of Nomura Holdings, has released a “dynamic participation” algorithm called Sidewinder that automatically adjusts its volume participation rate as stock price moves relative to a benchmark, allowing traders to take advantage of “value” or “momentum” situations, the firm says.
Sidewinder is available in the U.S. and will soon be available in any global market in which the algorithm's underlying functionality is supported. It allows clients to customise their execution style, benchmarks and participation rates, Instinet says. The algorithm offers two modes; 'value' mode, which increases participation rates when prices move towards the trader, and 'momentum' mode, which allows the trader to buy into a rising market or sell into a falling market by increasing participation rates, and vice versa.
Sidewinder can also be pegged to the widening or tightening of the spread between two stocks or between a stock and an ETF. Additionally, Sidewinder uses Instinet's SmartRouter to seek liquidity in major displayed liquidity pools in the U.S., and can be set to exclude block prints from its view of the market to avoid "chasing" inaccessible volume.
"Truly useful algorithms mimic what any good trader would do intuitively, while at the same time making the trading process more efficient," notes Michael Plunkett, president of North America, Instinet. "We developed Sidewinder with this goal in mind, attempting to enable both 'value' and 'momentum' traders to dynamically adjust their volume participation levels based on changing market conditions," he adds.
Sidewinder, which is available through Instinet's trading platforms — Newport and Instinet Trading Portal — or via partner systems, becomes the twelfth algorithm in Instinet's suite of global trading strategies. These include scheduling algorithms including Wizard, Wizard PRO, Global VWAP or Volume Participation; investment strategy-specific algorithms for pairs trading and risk arbitrage; and intelligent access algorithms, such as BlockPeg, Cobra and Nighthawk.