Weeden Adds Conditional Orders to Algos
The world of algorithmic trading strategies continues to evolve and incorporate new technologies as the buy-side traders’ need for natural liquidity and anonymity increases.
Greenwich, Connecticut -based Weeden & Co. has just announced it has upped its algorithmic offerings by building into them the usage of conditional order types into its existing liquidity seeking strategies. Also, the firm has completely rewritten its Pairs trading algorithm.
“These changes are the result of numerous discussions with clients based upon what they need from an algorithmic partner, especially given the current low volume and low volatility environment,” began David Margulies, Head of Electronic Products Group at Weeden & Co. “The introduction of conditional orders will greatly enhance our liquidity seeking strategies by maximizing block trading opportunities. Additionally, we undertook a complete rewrite of our Pairs trading strategy based upon extensive feedback from our client base.”
Recently released enhancements to the Weeden Algorithmic Suite include:
Usage of Conditional Orders – Conditional orders allow clients to represent their full order size on a “conditional” basis to help capture block size liquidity. Clients will have the ability to control minimum fill sizes and to decide which orders interact with conditional venues. Conditional orders are now embedded in the firm’s existing liquidity seeking strategies (Onepipe, Ghost and Capture algorithms).
“Yes, all of our liquidity seeking strategies now incorporate conditional orders,” Margulies told Traders Magazine. “We’ve been monitoring the usage of conditional orders around the Street – watching how they’ve gained traction and acceptance.”
Margulies explained that it took some time for conditional orders to gain traction. As volume has remained muted, traders are embracing the usage of conditional orders in order to meet their liquidity needs. After extensive development, Weeden made the change to its electronic strategies.. To hear Margulies explain it, conditional orders need to be constantly monitored, updated and processed to make sure an order isn’t over-filled” as it is placed at the various venues.
“This new functionality was used internally and among select clients for a month,” Margulies said, “But now it’s out of Beta and available to everyone. OMS providers are rolling out the upgraded algos now.”
Also, the firm’s Onepipe solution, its intelligent dark pool aggregator has been enhanced to include a so-called “Stealth Mode” option. As Margulies explained it, Stealth Mode sends orders to dark pools on a randomized basis and then immediately cancels the orders. The duration of the orders is extremely short, thereby facilitating the reduction of the footprint and order detection from predatory flow.
“We actually created Stealth at the request of a client,” Margulies recalled. “The client was looking to access dark pools as a liquidity taker. The idea was to stay in a pool for a very very short time, but then on a randomized basis leave them and find liquidity elsewhere. It performed well and other clients talked about doing the same thing – so we released Stealth Mode to a larger audience.”
So what about trading pairs?
Weeden and its technologists also went and from scratch created a new and improved pairs trading algorithm – PairsIQ. Margulies told Traders Magazine that the new PairsIQ tool has greatly improved routing logic to help capture more passive and mid-point executions.
“Traders now have the ability to choose how the Pair will execute.” Margulies explained. “Clients have the ability to choose between VWAP, TWAP, Volume Participation, or to trade aggressively.”
Margulies added that it took about six months to create PairsIQ – from blank sheet of paper to Beta to full usage.
“In speaking with our clients and seeing what they wanted, we saw an opportunity to rewrite the strategy from scratch. Users can now can choose their execution style that will help them get the correct amount of aggression in a strategy. Now they can trade within their ratios and not worry about pushing away from the spread.”
A new algorithm splits a difficult currency trade into two more liquid ones.
Algorithm leverages machine learning to find inter-listed liquidity.
New algorithm generates IOIs to find chunks of stocks.
Majority of managers say off-the-rack options don't cut the mustard.