US broker Knight Capital has launched a range of agency algorithmic trading and smart order execution strategies developed specifically for the European equity markets.
All orders sent to market via Knight’s EdgeTrade suite of algorithms for European equities are processed by the firm’s FAN smart order routing and execution capability, which is designed to source liquidity by adapting to market conditions in real time.
FAN, which has been used in the US market since 2006, has been customised to take into account the microstructure of European market destinations, according to Knight.
“Europe is on its first wave of liquidity fragmentation, while the US has already been through several,” Bradley Duke, Knight’s managing director, institutional electronic sales, Europe, told theTRADEnews.com. “A lot of the technology used by the trading venues is similar, but adapting to different spreads, rules, tick sizes etc has been a detailed project for our development team.”
Duke asserts that the pace of liquidity fragmentation across multiple trading venues requires better smart routing capabilities than are currently available to European market participants. “FAN re-evaluates the trade throughout its lifecycle, cancelling orders where it can see no action and redirecting them to other venues. Other routing tools might reallocate a number of times before dumping the balance on the primary exchange,” he said.
Knight said that FAN had also adapted to the complexities of Europe’s equity clearing infrastructure, by allowing clients to complete trades across multiple market centres on a single ticket.
Execution algorithms in the EdgeTrade suite include: FAN, which dynamically sweeps and posts orders to public liquidity and dark pools; Covert, which posts and fills orders in dark pools exclusively; and Sumo, an aggressive strategy designed to reduce information leakage and minimise market impact. FAN is also incorporated into various benchmark and participation algorithms designed for European markets.
The rollout is part of a wider expansion of Knight’s execution capabilities in Europe, which will include the introduction of crossing services.