Bank of America Merrill Lynch today announced that it has added a highly adaptable Pairs strategy to its suite of award-winning algorithmic trading products.
The Pairs strategy is built on the same proven and robust platform that hosts Bank of America Merrill Lynch's other algorithmic trading strategies. As such the Pairs strategy is able to take full advantage of the company's intelligent liquidity seeking smart order router (SOR), low latency infrastructure, and also access to internal liquidity.
A Pairs trade is a combination of a buy and a sell order designed to execute when a user specified relationship between prices holds true. Orders are executed in such a manner as to ensure consistent execution of both the buy and sell orders. The price relationship is generally expressed in terms of a ratio or a spread. There are usually multipliers or offsets to be considered, hence the Pairs trading instructions are usually expressed in terms of a formula.
The strategy's four operating modes - Spread, Inverse Spread, Ratio and Inverse Ratio - have a number of parameters which allow traders to adapt and customise the execution behaviour to suit their own trading style or objectives. These include formula entry, control over child order size and both passive and aggressive order book tactics.
Ashok Krishnan, head of EMEA Execution Services, at Bank of America Merrill Lynch, said: "Over the past year we have seen global interest in Pairs trading grow significantly. In response to this demand, we have initiated a global project to roll out Pairs strategies in each region. We began in the US last year, and since then our technology team in Europe has been developing the platform to handle cross currency trading, among other enhancements.
"The strategy has been developed in close partnership with our own traders; giving us the knowledge and confidence that it will meet our clients' needs."
Bank of America Merrill Lynch was ranked as one of the top providers of algorithmic trading solutions based on the results of The TRADE magazine's 2010 annual Algorithmic Trading Survey; the third year in a row that the company has been recognised by the global securities trading magazine for its strengths in the electronic trade arena.