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November 17, 2011

Price Matters

By James Armstrong

Institutional broker Weeden & Co. and its - partner, technology vendor Pragma, have unveiled an - algorithm that adjusts its rate of speed in response to price changes.

The algo, dubbed Ghost, simultaneously scans lit and dark markets, using a stock's price direction to determine execution speed.

Ghost was officially launched earlier this month and now has about 250 buyside users. According to David Margulies, head of the electronic products group at Weeden, the algo increases its trading rate when a price becomes favorable and slows down orders when prices move adversely.

He added the algo is valuable during volatile periods, especially for micro, small and mid-cap securities, where a large order can potentially move prices.

"In a market where volatility is in play, we've seen quite a nice uptick in usage of a product like this, because as stocks are oscillating up and down, we're able to take advantage of favorable price moves," Margulies said.

Ghost monitors for prices and then tries to establish that the price is valid, he said. Sometimes stocks move on very little volume, and traders don't want to participate if somebody is just trying to game the order, he added.

Users can customize the algo to look for specific price movements.

The algo also uses the newest version of the Lifeguard anti-gaming logic, which has been updated to better deal with high-frequency order flow.


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