Société Générale has launched a new relative value algorithm that gives the buy-side the ability to manage their level of trading aggression when a stock appears mispriced compared to its underlying index.
The new algo, which can serve as an alternative to the investment bank’s volume inline strategy, uses 35 indicators based on a stock’s performance and prevailing market conditions to monitor short-term fair value.
Using one indicator that informs clients when a stock price does not follow the performance of its underlying index, SocGen clients can increase or decrease their participation accordingly.
For example, if a buy-side dealer is trading an automotive stock and participating at 20% of market volume, he may decide to increase participation to 30% if the stock price does not increase in line with the sector.
According to Mark Goodman, head of quantitative electronic services, Europe, SocGen, the new strategy is particularly useful in the current market environment.
“In the volatile market conditions, there are more opportunities for capitalising on mispriced stocks. Combined with high levels of correlation, it is possible to generate complex signals which indicate short-term price movements”, Goodman told theTRADEnews.com. “Our algorithm gives clients the ability to control their participation based on this short-term indicator.”
The algorithm is available via most third-party trading platforms and via a direct FIX connection.