algo_1 - A buy-side handbook Algorithmic trading Published...

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A buy-side handbook Algorithmic trading Published by The TRADE in association with:
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1 Sekforde Street London EC1R 0BE UK www.thetrade.ltd.uk Tel: +44 (0) 20 7075 6115 Published by ©The Trade Ltd. London 2005. Although The Trade has made every effort to ensure the accuracy of this publication, neither it nor any contributor can accept any legal responsibility whatsoever for consequences that may arise from errors or omissions or any opinions or advice given. This publication is not a substitute for professional advice on a specific transaction. No reproduction allowed without prior permission. Graphic design by Tina Eldred tina@eldreddesign.co.uk
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ALGORITHMIC TRADING ABUY-SIDE HANDBOOK THE TRADE 2005 A buy-side handbook Algorithmic trading Foreword D ifferentiating between the algorithmic trading offerings of brokers remains a problem for the buy-side. At the same time, brokers are searching for ways to achieve competitive edge and raise the profile of their algorithmic trading capabilities. These issues have to be overcome to realise the exponential growth that is forecast for algorithmic trading. The TRADE in association with leading industry participants drawn from the brokerage and vendor communities has set out to bring clarity and thought-leadership to the issues that are driving developments in the algo- rithmic space by publishing ‘A buy-side handbook on algorithmic trading’. Part 1, ‘Market and mechanics’ , examines what is driving the growth of algorithmic trading, focusing on the rapidly evolving shape of the market. Insights are offered into how algorithms work and the relative merits of broker-driven versus broker-neutral algorithms are quantified. Part 2, ‘Honing an algorithmic trading strategy’ , highlights the issues that buy-side traders must address once the decision has been taken to adopt an algorithmic strategy. Selecting an appropriate trading bench- mark, the importance of anonymity to stem information leakage, applying stealth through sophisticated gaming theory, and customisation of broker algorithms are all addressed here. Part 3, ‘Quantifying and enhancing value’ , focuses on measuring and interpreting the performance of disparate broker algorithms, the value added through independent third-party transaction cost analysis and the role of technology in enhancing market access. Part 4, ‘Emerging trends and future direction’ , covers ‘next generation’ algorithms, focusing on implementation strategies for basket trading and the shape of the market going forward, when competition and increased buy-side demand will call for a higher order of intelligence in engineering algorithms. The handbook is completed with a guide to broker algorithms, containing details of individual broker offerings and including information on the range of benchmarks available, levels of customisation, performance measurement and connectivity options. John Lee The TRADE 3
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A buy-side handbook – Algorithmic trading
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This note was uploaded on 10/27/2010 for the course CSCI CS111 taught by Professor Howland,p during the Fall '08 term at CUNY Queens.

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algo_1 - A buy-side handbook Algorithmic trading Published...

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