UBS has launched a new algorithm which handles stocks characterised by low liquidity or unpredictable volume profiles.
Available globally, Swoop is an opportunistic strategy that does not follow a volume or price schedule.
According to Charles Susi, global co-head of UBS’s Direct Execution Services unit, the algo is designed to meet client demands for urgency while determining the best time to participate in the market.
“Clients are demanding algorithmic strategies that are not schedule-based and have been designed specifically for stocks with hard-to-predict volume profiles,” Susi told theTRADEnews.com. “UBS Swoop will take displayed liquidity when it is oversized and priced favourably, but will also hold back when the available liquidity is not attractive.”
The algo’s logic looks at prevailing liquidity offered in the market to determine whether the quoted size is larger than average. When an appropriate level of liquidity is on offer, the algorithm uses the Swiss bank’s price sensitivity models to ensure fair value for the stock is achieved when trading.
Stocks with irregular volume profiles can also be unpredictable in terms of where they trade, which requires connectivity to as many trading venues as possible to avoid missing out on potential liquidity. Susi noted that UBS has conducted a lot of analysis that measures the quality of liquidity on different trading venues.
Swoop will also place orders in the dark, including to UBS’s own internal Price Improvement Network.
“Our Price Improvement Network has a lot of diverse retail liquidity, much of which is small-cap liquidity, so the combination of Swoop with PIN can be particularly effective for these types of low ADV stocks,” said Susi.
Unlike most algo launches, Swoop will be rolled out simultaneously across Europe, the US and Asia.
"We were keen to globally launch this algorithm in a way that is tailored to each market,” said Susi. “We have many global clients that prefer to have a consistent execution experience across the regions in which they operate.