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AFTAs 2022: Best new technology introduced over the last 12 months (AI and machine learning)—Pragma

Project: Mercury

    • WatersTechnology Staff

Overview

Mercury is the culmination of a two-year research and development project to apply artificial intelligence to Pragma’s execution algorithms. This included the use of deep neural networks to govern routing, sizing, pricing and timing of orders within an execution algorithm’s micro-trading engine.

What problem does it solve?   

Innovation is key to improving execution quality for Pragma, a New York-based algorithmic trading technology provider. Traders and end-investors are increasingly looking to benchmark execution quality to ensure they receive the best price possible in the market. The use of advanced AI techniques to leverage signals in a way that traditional algorithms cannot improves the solution to the questions: what and where is best execution?

“The benefit of AI models is that they allow us to better tailor our algorithms’ use of dynamic, real-time signals and market conditions to the complex, multi-dimensional interactions of stock characteristics and order requirements. There is no one-size-fits-all approach to trading, and simple stylized models just can’t match the power of a deep neural network.”

How does it solve the problem?  

According to Pragma, Mercury has been in production for over two years, with strong client adoption due to its ability to improve execution shortfall for clients by upwards of 50%. Pragma’s simulation environment for Mercury allows for continuous research to find new signals to further improve clients’ execution quality.

Future developments  

Pragma has already rolled out multiple “agents” since Mercury initially went live; the firm plans to roll out the offering for Canadian equities by the end of 2022. Pragma’s knowledge of market microstructure and its research-driven approach developed over the past 18 years makes this possible for its clients.

Why they won

The somewhat nebulous concept of best execution has evolved over the years to mean different things to different capital markets firms according to their own specific criteria, although the variables by which they measure it remain largely the same: ensuring the best market price is obtained for an order, determined according to how and where it is routed, the size of the order, and when it is placed. Pragma’s Mercury offering is designed to manage all of the above through advanced AI functionality so that brokers, buy-side firms and their end-investors can be confident that the quality of their executions is fully optimized.  

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