Singapore, Hong Kong Algo Performance Lags Japan
Singapore and Hong Kong lag Japan when it comes to algorithm performance across markets, according to a recent study released by trading technology provider Tora Trading.
Through the first six months of 2010, Tora officials examined 120,000 algo orders from their client base and found that in a best-case performance comparison against the volume-weighted average price (VWAP) benchmark, slippage, the difference between the expected price of a trade and the price where the trade is actually executed, was 111 percent higher for Hong Kong than Japan and 236 percent higher in Singapore than Japan.
This is likely due to liquidity concentration as well as differences in market structure for markets outside Japan, say Tora officials.
The study found that the average slippage in Singapore was 15.1 basis points (bps) and 9.5 bps in Hong Kong. In Japan, it was 4.5 bps for Tora clients.
"Our analysis looked at a wide range of factors that affect performance, including liquidity, volatility, spreads and user-defined parameters," said Tora CEO Robert Dykes in a prepared statement. "The key to maximizing algorithm performance is to use the one that best reacts to prevailing market conditions."
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