In a move to help its buy-side clients access liquidity in U.S. equities, Citi today is rolling out an extensive set of new functionality including open and close algorithmic trading strategies, a redesigned global order ticket and a revamped smart order router for order placement.
Over the past six months, Citi has worked closely with clients and external technology providers to improve the execution quality, liquidity discovery tactics and trader workflow options available to its institutional clients. Working with a team of financial engineers, technologists, quantitative analysts and Citi traders, the firm is launching a significant upgrade of its Self Directed Trading Suite, according to the release.
“Despite the meaningful liquidity available on the market open and immediately following the initial print, many traders prefer to stay away from this part of the session,” said Tim Reilly, Head of Electronic Execution Sales, Americas, in an exclusive interview with Advanced Trading. “The liquidity problem often seen is that over ten percent of the day’s volume trade in the early part of the session. In a low liquidity environment avoiding this window can be a disadvantage. For this reason, Citi developed a strategy to conservatively participate on the open and then execute in a highly disciplined mode over the first ten minutes of the day,” explained Reilly.
As intraday order flow has become more concentrated on the open and in the immediate 15 minutes of the opening, Citi has worked on a strategy to take advantage of order placement in the opening auction.
The new ‘open’ algorithmic trading strategy was introduced in partnership with the firm’s hedge fund and global investment management clients that worked collaboratively on a method to trade the opening auction as well as the first 10- to-15 minutes of the session in a more disciplined way.
Following the open, the new algorithm utilizes data driven tactics to seek out liquidity and manage signaling immediately following the first print, said Citi in its release.
Citi also rolled out a new close algorithm that focuses on the last 30 minutes of the trading day, including the closing print. While all the major broker dealers have a close algorithm, most strategies are largely focused on managing an order into the various closing auctions, said Reilly.
Citi said it reengineered its Close algorithm to trade large orders “more intelligently into the close, vs. its historical emphasis on the final print.
“What Citi has done is stretch the liquidity profile to consider the entire final thirty minutes of the day,” said Reilly. “We must manage the closing auction, but also respond to exchange feeds and conditions over the final half hour,” he said.
Most of the MOC (market on close) algos are participating in the closing auction of the Nasdaq, Arca or NYSE. “But with the robust liquidity U.S. markets displayed late in the day, clients want a Close strategy with the option to trade opportunistically prior to the close,” said Reilly.
“Most Close algos place almost the entire order on the primary exchange MOC book, but with the robust liquidity U.S. markets display late in the day, clients want a Close strategy with the option to trade opportunistically prior to the close,” added Reilly.
As they are receiving orders into their closing auction, all of the exchanges use different protocols for communicating imbalance data every few seconds. “There is a buffet of market data around the closing auction market data coming out of the exchanges each day. The Citi Close strategy reads it, analyzes it and modifies the trade schedule accordingly.” Individual stock profiles are combined with real time imbalance data to manage execution in real time throughout the final segment of the day.
A Redesigned Order Ticket
A Citi internal working group also redesigned the firm’s global order ticket layout and workflow in partnership with major OMS/EMS vendors. “The new ticket is more intuitive and efficient,” said Reilly. “There are new ways a client can take control of their orders. We’ve streamlined the ticket, added powerful new parameters, but also worked to keep it simple,” he added.
Citi is working with every major OMS and EMS to deliver on its goal. Part of the launch includes the ability to “opt-in” on displaying individual orders to a high touch sales trader, noted Reilly.
“If you are trading multiple electronic orders with a broker, it is likely each order has unique characteristics. For certain orders, some clients want the choice to direct individual electronic order information to their high touch sales trader. In the search for liquidity we want clients to have every option” explained Reilly.
Citi plans to roll out the new order ticket today with the first four vendors including Bloomberg, RealTick, Flextrade and ITG Triton, while Charles River, Portware and TradingScreen will be introduced throughout the month of June.
Citi also completed a redesign of its smart order router order placement model to be more strategic about how it seeks liquidity and manages orders across the various exchanges and dark pools.
According to the release, the new Smart Take/Smart Post logic has increased fill rates on marketable orders and also improved its liquidity-capture performance on resting orders. “If you are a taker of liquidity the model seeks to maximize the fill rate at every price level both inside and across the spread. Non-marketable orders are a different challenge. We’ve designed methodologies to increase the likelihood that a contra order when crossing the spread will interact with your resting order,” he explained. The more sophisticated smart order router requires “highly efficient data processing and liquidity mapping logic,” said Reilly.
Reilly also said the firm’s financial engineers and quants have built out individual stock profiles to improve real time decisions and improve execution performance.”
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio