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T H O M S O N F I N A N C I A L

T H O M S O N F I N A N C I A L. Algorithms in the Trading Day North America. Michael Raines, Institutional Equities, Global FIX Connectivity Thomson Financial Michael.Raines@thomson.com. What Algorithms are Being Implemented?. VWAP.

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T H O M S O N F I N A N C I A L

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  1. T H O M S O N F I N A N C I A L Algorithms in the Trading Day North America Michael Raines, Institutional Equities, Global FIX Connectivity Thomson Financial Michael.Raines@thomson.com

  2. What Algorithms are Being Implemented? VWAP VWAP, Target Strike, Target Percent of Volume, Close, TWAP, Market On Open, Auction, Dynamic, Scaling, GSAT Navigator, BlockPeg, Liquidity Staging Model, Fusion, Price Capture, Piccolo, Market Call, Iceberg, Sit & Pounce, Work & Pounce, Volume Participation, Slicer, Pairs, Limit, Temp, Cross Only, Limit on Close, Arrival Price, Participate, Inline, Price Capture, Smart Market, DMA Market On Open Market Call Sit & Pounce Participate Smart Market

  3. The Why of Algorithms Buy Sides: To manage market impact. Manage Risk, Improve Execution Strategies & Quality Sell Sides: To meet the buy sides need as above. Further, to deploy the successful algorithm to other applications for additional revenue—third party, Toms/Oms, crossing networks, etc. Both: Beat the market, beat the competition. Work Flow for Algorithms Objectives: Cost Analysis and Portfolio Construction • Portfolio Manager and Trader in concert • Pre-Trade analysis identifies corresponding algorithm • Execution and Evaluation Further analysis during the course of the trade to change/modify the algorithm and post trade valuation.

  4. Examine Volume at Price, Real Time Examine the Trade after Completed

  5. Algorithms—a view from the Street “A trader cannot mimic the speed, intelligence and agility of an algorithm in a tactical sense: i.e., bid fade, float, take in multiple venues, trade in line with the sector or market—in 10 stocks, at one time….” “An algorithm cannot match the intelligence of a trader in a strategic sense: the algorithm doesn’t know that the order is the start of a new position or that you are moving out of an enormous position, that there was a recent secondary and xyz broker is holding up the stock, your appetite for crossing the spread…etc….” --Mike Hoover, Sr. Equity Trader, American Century

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