Bank of America Merrill Lynch Rolls Out ETF Algorithm

Bank of America Merrill Lynch has rolled put ETF-aX, an exchange-traded fund algorithm which purports to identify the most efficient combination of ETF, stock, and futures and then automatically trade them to source liquidity and find the best prices.

After receiving a client’s order to trade an ETF, BofA Merrill said the engine analyzes the inside pricing and depth of book across the ETF, stock, and futures markets to pinpoint available liquidity. After determining the most efficient way to transact, balancing the need for low prices against a desire to capture as much liquidity as possible, slices are then simultaneously sent to different market centers, the firm said.

“The primary challenge with trading ETFs is market fragmentation; liquidity is limited outside of the top-ranked ETFs,” Charlie Whitlock, an execution consultant at BofA Merrill said in a statement. “By using ETF-aX, clients are able to leverage our in-house ability to trade a combination of the component parts in different markets, gaining liquidity at more efficient pricing.”

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio