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January 18, 2012

BoA Revamps Its Flexible Algo

By James Armstrong

Bank of America Merrill Lynch has revised its algorithmic trading strategy for its institutional equity clients. It lets them to customize how aggressively they want to pursue liquidity.

Dubbed Instinct, the algo now features five urgency levels, allowing clients to fine-tune parameters on an order-specific basis.

"Clients are going through algo consolidation," said Michael Lynch, head of Americas execution services for BofA Merrill. "They want simplification and adaptability."

The buyside has been reportedly paring down the number of algos its uses from dozens to a ten or so.

Instinct has been simplified from its original iteration in 2006 by combining overlapping strategies and reducing parameter complexity. It supports trading across varying market caps, employing a suite of real-time signals and a quantitative model that calculates order tradability.

Traders can choose a level of urgency, from one, which is the least urgent, to five, which provides the fastest access to liquidity.

Lynch said that one of the benefits of multiple urgency levels is that clients can choose which level of urgency is appropriate based on the individual stock and specific market conditions.

The revamped Instinct accounts for about 20 percent of average daily client volumes, according to BofA Merrill.

 

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