A new algorithm from Société Générale aims to help institutional investors achieve better results when executing orders that target a strike price at a specified time in the future.
Available for both cash equities and futures traders, SmartStrike aims to give the user greater flexibility and discretion when trying to minimise slippage versus the strike price.
When sending an order, or basket of orders, via SmartStrike, users first specify the strike time they are targeting. The algorithm then calculates the optimal start time based on the liquidity profile of the individual stock “as well as trading more intelligently around the strike to maximise spread capture and potentially outperform the benchmark”. Limits can be set on price and maximum participation rates.
Sending an order at a specific point in time to achieve a benchmark can be difficult if there is insufficient liquidity available, thereby increasing the risk of market impact. SmartStrike’s flexibility overcomes this issue and also provides an opportunity to outperform the benchmark by capturing the spread.
SmartStrike will execute at or as close as possible to the strike time when price certainty is highest. The strike period can be extended or shortened depending on risk appetite.
The algorithm can be accessed via third-party trading systems or via direct FIX connections.