Instinet Unveils Algorithms for Asia Pacific

Instinet said it launched its Execution Expert suite of algorithms in Asia. The event-driven strategies, which are currently used by Instinet's clients in North America and Europe, have been tailored for the Asia-Pacific markets, the agency-broker said.

In a statement, Glenn Lesko, CEO for Instinet in Asia, said the “Asia-Pacific markets have developed to a point that the simple algorithmic strategies historically employed here are no longer adequate,” he said. “Exchange speeds and liquidity access have improved dramatically, and new venues are competing with primary exchanges across the region. This brings both challenges and opportunities, and our Experts algorithms address them directly.”

The TEN strategy, which is part of the new Experts platform, is a novel approach to benchmark trading, enabling traders to select a balance between arrival, VWP and departure price benchmarks.

According to Bryce Kelly, head of Asia-Pacific Product Strategy, the Experts are built on a platform that allows the algorithms to dynamically adjust trading activity when market conditions change and engage with markets when signals dictate attractive times to trade. “To exemplify the benefits of this type of behavior, the Experts were very effective in helping our U.S. clients avoid trouble during the ‘Flash Crash’ in May.”

The Execution Experts suite in Asia-Pacific, which has been customized to address trading challenges specific to the region, consists of ten individual strategies. They are as follows:

—BlockPeg: BlockPeg accesses liquidity with minimal impact on the spread by posting orders on the passive side of the market while crossing the spread for user specified quantities. Cobra: Cobra stealthily seeks hidden liquidity in both lit and dark venues to minimize signaling and market impact while maximizing shares traded.

—Dynamic Participation (DynaPart): The DynaPart strategy dynamically adjusts participation rates in response to price changes, increasing or decreasing target participation according to the selected trading style. The strategy also allows users to exclude dark and block liquidity from volume calculations.

—TEN: A multi-benchmark strategy, TEN allows users to balance tracking VWAP, Arrival and Departure price by assigning weights to each of the three benchmarks. TEN uses dynamic programming optimization to integrate Instinet’s price and volume prediction models into a robust benchmark strategy.

—Nighthawk: Nighthawk seeks hidden liquidity, intelligently accessing dark-liquidity sources to execute orders with sophisticated price-modeling and allocation logic. Nighthawk logic is embedded in all strategies in the Experts suite.

—Implementation Shortfall (IS): IS balances opportunity cost and market impact to minimize arrival price shortfall. TargetClose: TargetClose minimizes slippage and impact versus the closing price. The TargetClose strategy allows users to trade outsized orders benchmarked to the close that otherwise might create undue pricing impact if sent with a Market on Close order.

—Participation: The Participation strategy trades a targeted percentage of market volume over a specified trading horizon. The Experts Participation utilizes volume prediction and advanced tactics to disguise its intentions.

VWAP: VWAP targets the volume-weighted average price (VWAP) for a specified trading horizon. The VWAP strategy is best suited to relatively liquid orders that must be completed by a specified end time. TWAP: TWAP trades against the time-weighted average price (TWAP), spacing an order evenly across the specified time horizon.

The ten strategies are available through Instinet's Newport 3 EMS and a host of third-party EMS vendors as well as via direct FIX connectivity.

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