Electronic broker Instinet has launched Wizard, an 'arrival price' algorithm that sets its trading schedule by balancing a stock's historical performance as well as the volatility implied in its option price.
The algorithm, which is available through Instinet's Newport and Trading Portal front-ends, is based on a US short-term equity risk model developed by Northfield Information Services.
The Wizard algorithm allows dealers to set limit prices and start and end times for trades, and to choose among styles - aggressive, passive and normal - depending on the desired execution timeframe.
Michael Plunkett, president, North America, Instinet, says: "Wizard uses a 20-factor risk model to set the trading schedule, thereby moving traders beyond an 'execute now' scenario to one which the stock is allowed to potentially move in the trader's favour."
Furthermore, by utilising Northfield's 20-factor risk model, the algorithm develops a customised trading schedule for each stock by taking into account its historical and option-implied volatility, which is a measure of the likely impact of future events like mergers and acquisitions, Federal Reserve behaviours and geo-political news.