Agency broker Bloomberg Tradebook has enhanced six of its low-touch algorithms to enable them to deal more effectively with volume spikes on so-called special quote (SQ) days in Japan.
SQ days, when stock options or equity index futures expire, are typically characterised by significant spikes in opening volumes. The is particularly true for ‘big SQ days’, when equity index futures expire, but also applies to ‘small SQ days’, when stock options expire.
According to research from Bloomberg Tradebook, volume spikes on SQ days can affect trading algorithms’ ability to fulfill their goals effectively. The research examined the opening trading patterns – including volume and average percentage increases – of stocks that underlie equity index futures and stock options to ascertain how they are affected at the market open on SQ days.
“Trading during the opening on SQ days has presented challenges to traders who use various algorithms,” said Gary Stone, director of trading research for Bloomberg Tradebook. “The changes we have implemented based on our proprietary research will allow traders to continue benefiting from using our low-touch algorithms.”
The next big SQ days are on 11 September and 11 December, while the next small SQ days are on 9 October and 13 November.