April 2, 2013

ITG Algo Taps Auction Close

By John D'Antona Jr.

Agency broker ITG announced a new algorithm designed to help traders better trade during the close, or the final 15 minutes of the day.

The new algo, dubbed ITG Dynamic Close, looks to reduce the price impact from over-participation during the NYSE and Nasdaq closing auctions. The algo is specifically tailored to the processes of each exchange and employs data from their real-time imbalance feeds. It responds to these changes in imbalances and executes orders where appropriate.

This algorithm is a follow-up to the broker's Dynamic Open algo, released last April. That algo is helping traders tap the liquidity available during opening auctions of the New York Stock Exchange and Nasdaq.

Jeff Bacidore, ITG managing director and head of algorithmic trading, told Traders Magazine that historically, algorithms have not been as thoughtful in terms of how they interact with the market close imbalance information and how much impact they might have at that time.

NYSE and Nasdaq publish their order imbalance data, the difference between buy quantity and sell quantity, at 3:45 p.m. and 3:50 p.m., respectively.

"By focusing on the close itself, we found it's often too late and the market has already priced in a market imbalance, affecting best execution," Bacidore said.

The new algo, like Dynamic Open, is available via ITG's Triton execution management system and also via FIX connection to ITG from third-party trading systems.

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