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December 1, 2011

ConvergEx Portfolio Algo For Dark Pools

By James Armstrong

ConvergEx Group recently announced the launch of the first in a new series of portfolio algorithms, this one designed specifically for executing in domestic dark venues.

Dubbed Spectrum, the algo allows traders to maintain their required cash and sector balances, something ConvergEx says is not usually available in algos for dark markets.

"If you worked on a portfolio desk for the last five years, it's been really frustrating," said Gary Ardell, head of the financial engineering and advanced trading solutions group at ConvergEx. "All your peers over on the single-stock desks have been using better and better dark technologies. But you couldn't use them, because the cash constraints and the risk management were just too hard."

With most dark algos, an order can get executed quickly or remain pending for a considerable period of time, Ardell said. That simply won't do for portfolio traders, who need to precisely manage risk and cash balances, he said.

Spectrum offers features that are included in many portfolio algos for lit markets but are not always available in the dark. For instance, it offers three separate cash objective options based on a customer's preferred level of cash constraint, allowing them to make sure they are keeping the appropriate level of cash on their books for a portfolio.

The algo also supports three distinct settings for risk management, configuring to meet a user's selected level of risk aversion.

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