EdgeTrade introduces smart order execution algorithm
15 November 2005 | 1043 views | 0
EdgeTrade, agency broker and developer of algorithmic strategies and direct market access (DMA) software utilized by institutional buy-side and sell-side firms in North America and Europe, today announced the launch of Sumo, a simple-in-concept yet elegant algorithm that allows traders to complete a single stock or portfolio trade, efficiently and electronically, without having to resort to time-consuming limit orders or a market order that can typically leave a trader exposed to poor execution.
Sumo, as with all EdgeTrade agency algorithms, provides traders with anonymity. Clients of EdgeTrade include hedge funds, mutual funds, asset management firms and broker-dealers.
Sumo is described as a smart order execution algorithm because it is the next generation in smart order routing. Smart order routing takes a snapshot of a book at one point in time and responds one dimensionally. Sumo, as a smart order execution algorithm, quickly determines how much of an order to send out for execution, the destinations and timing.
"Our quantitative team listens to traders, and what they asked for is an algorithm that would get a trade executed quickly much like a market order but without the risk of showing their hand in one shot," said EdgeTrade CEO, Joseph Wald. "Hard as it may be to believe, most traders do not have access to an algorithmic tool that enables them to accomplish this. Fact is: most broker/dealers are rife with internally competing interests that prevent them from developing a Sumo or other electronic tools demanded by traders. EdgeTrade's conflict-free agency environment and consultative approach with clients, results in traders getting the tools they want."
Limit orders have limitations when quickly filling an order is critical. Traders must micro-manage limit orders until the full size has been executed; a process that is both time-consuming and open to various opportunity costs. Market orders can complete a fill in one execution, though a trader runs the risk of market exposure and an inferior execution price by demanding liquidity in one place and instant in time. Sumo solves this dilemma by micro-managing an order for a trader: a single order placed by a trader using Sumo is completed with a series of electronic fills. The trader, in using Sumo, is in a better position to take immediate advantage of an opportunity without losing time or having their entire order subjected to market exposure.
EdgeTrade's overarching mission is to empower traders with an uncompromised agency model that offers high-speed and quality of anonymous execution, coupled with innovative trading technology.
"Sumo is a smart order execution tool that operates from a basic premise that getting a trade done quickly, electronically and as a single order without the need of a benchmark, offers far more advantages than going with a limit or market order or even smart order routing," said EdgeTrade Chief Technology Officer and Chief Quantitative Strategist, Frank Brown. "Sumo also helps free up time for a trader, and is another reason why we expect it will become quickly adopted."
EdgeTrade is gaining widespread recognition for its array of sophisticated algorithmic strategies, organically developed and customized for each client by the firm's quantitative team. Through Execution Management System (EMS), EdgeTrade's independent, agency front-end platform, institutional buy-side and sell-side traders place single stock and basket equity orders. A high-speed gateway to multiple execution venues, DMA order types, algorithmic trading strategies and low latency market data, EMS may be customized to each trader's screen specifications. While a holistic offering, EMS is modularly designed to give traders what they want and how. For instance, a trader may integrate EdgeTrade's algorithms into their own front-end rather than using EMS. As an open platform, traders have the option of connecting to EMS via FIX (Financial Information eXchange) or through other trading and order management systems. EdgeTrade’s algorithmic strategies and direct market access order types are currently integrated with major industry trading and order management systems.
"As a firm offering a robust direct access platform, we constantly evaluate strengths and weaknesses of DMA," said Wald. "EdgeTrade is leveraging its algorithmic expertise to evolve DMA, and Sumo represents that next step. As an agency broker with no internal conflicts of interest, we are free to look at best execution, technology and tactics from more than one perspective and develop tools that traders really want."