ITG, an agency brokerage and financial software firm, has adapted its single-stock arrival price benchmark algorithm, Active, for the Asia-Pacific region.
Active works by closely tracking an arrival price benchmark – the price at the time a portfolio manager issues the instruction to trade – and adjusting its participation in the market depending on price, available volume and market conditions, such as spreads and volatility. It combines two trading styles: steady trading at the current bid or offer price to avoid market impact; and more aggressive participation when prices are favourable and to ensure the order gets completed in time.
According to ITG, Active can be used to help traders limit exposure to volatility, reduce risk and manage trading costs. Recent research from ITG showed that between 2007 and 2008, expected trading costs in Asian markets increased by 100 -200% as volatility became more severe.
“Active is ideal for traders wanting to take a risk-averse strategy given recent market volatility,” said Gabriel Butler, head of sales and trading for ITG in Hong Kong, in a statement. “It monitors and responds quickly to changes in the order book, reacting in a similar way to how a human trader might in those conditions. As trading costs soar across the Asia-Pacific region, tools which adapt rapidly as the market moves are more important than ever for managing costs and seeking best execution.”
Active is already available for the US and European markets.