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January 3, 2011

ITG Pairs Algo Sweeps North America

By John D'Antona Jr.

Agency brokerage Investment Technology Group rolled out its new pairs trading algorithm, Hedge Pro, which lets the buyside trade across regions.

ITG developed its new algo to save traders time by calculating different currency values in real time. The conversions should help maximize profits and shorten trade time.

Pairs and other arbitrage strategies profit from small pricing discrepancies--they involve buying one instrument and selling another correlated security. Demand for the algo stems primarily from hedge funds.

According to Hitesh Mittal, head of liquidity management at ITG, the algorithm allows traders to execute any North American equities pairs combination using strategies such as risk arbitrage, statistical arbitrage and cross-border trades. Putting on trades and hedging are handled automatically using continuous monitoring and signaling from individual quote ticks.

"You can also specify different levels of aggressiveness on how the algorithm executes orders," Mittal said.

Hedge Pro is currently available only via ITG's Triton execution management system. By early 2011, it will be available on other third-party systems, such as Bloomberg.

Mittal said several of ITG's hedge-fund and long-only clients are already using Hedge Pro.


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