Waters Rankings 2016: Best Algorithmic Trading Provider — Convergex

convergex-algo-watersrankings2016
Troy Draizen, Tim Kurkjian, and Oliver Sung

If, as a capital markets firm, you aren’t using trading algorithms to at least some degree, there are two possibilities: Either you’re based in some backwater and you route your trades to your brokers by phone calls and faxes and they execute them on your behalf using their own algorithms, or you’ve just gone out of business. Algorithms really are that important to all capital markets firms looking to maximize their investment performance and efficiency.

For the past two years—in fact, ever since this category has been on offer—Instinet, the agency-only broker, based in New York and owned by Nomura, has walked away with this award, thanks to its highly respected Instinet Execution Experts business.

But this year, Convergex has put paid to Instinet’s hat-trick, thanks to what amounts to a veritable cornucopia of algorithms, ranging from the fairly standard—closing price and benchmark algos—to the spiritually inspired—Abraxas, designed to spread orders among the most desirable venues, accessing displayed and non-displayed liquidity, while seeking to minimize information leakage—and the apparently spooky, by virtue of the firm’s Darkest algo, which sniffs out liquidity from over 20 non-displayed alternative trading systems, while maintaining anonymity. And then there are the firm’s liquidity-seeking, opportunistic and custom algos. So yes, as far as algos go, Convergex has every base covered.

In June this year, the firm unveiled its Small Cap algorithm, designed to maximize liquidity in less liquid names, while simultaneously minimizing market impact. According to the New York-based agency broker, Small Cap “hides” in over 15 alternative trading systems (ATSs), and will exit the market when it senses that it is signaling its presence to other market participants. The algo will then return to the market when it determines that it is advisable to re-engage. Meanwhile, block executions are continuously analyzed for the potential execution of conditional orders. 

Also in June, Convergex tweaked the configuration options of its Darkest algo to provide greater flexibility, block-trading functionality, and enhanced anti-gaming tools when trading in European dark pools. The algo is designed to dynamically source non-displayed liquidity from regulated markets, multilateral trading facilities (MTFs) and broker-crossing networks, while maintaining anonymity, while its proprietary methodology monitors liquidity conditions on an ongoing basis and adjusts its attributes to take advantage of available liquidity. Darkest’s proprietary methodology allows users to source almost all of Europe and Asia’s dark liquidity with minimal information leakage, according to the firm. 

Other technology vendors or brokers that featured prominently in this category include Thomson Reuters (by way of its FlexTrade Spark EMS module), Morgan Stanley, and Pragma Securities.    

Convergex tweaked the configuration options of its Darkest algo to provide greater flexibility, block-trading functionality, and enhanced anti-gaming tools when trading in European dark pools. The algo is designed to dynamically source non-displayed liquidity from regulated markets, multilateral trading facilities and broker-crossing networks, while maintaining anonymity, while its proprietary methodology monitors liquidity conditions on an ongoing basis and adjusts its attributes to take advantage of available liquidity.

 

 

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