April 2, 2013

Weeden Algo Targets End-of-Day Liquidity

By John D'Antona Jr.

Institutional broker Weeden & Co. has released a new algorithm designed to capitalize on the increased trading activity near and at the equity market close.

The algorithm, CloseIQ, is designed to take advantage of the increased volume, tighter spreads and lower volatility toward the end of the trading session, or the last 30 minutes, as compared with the rest of the day, said David Margulies, head of the electronic products group at Weeden.

"Given the dramatic shift of volume moving to the last 30 minutes of the trading day, many of our clients were asking for a better way to trade into the close and take advantage of this changing volume pattern," Margulies said.

Based on the size and liquidity characteristics of the stock, CloseIQ will automatically choose the appropriate start time of the order while placing an optimally sized portion in the NYSE's closing auction.

For stocks that are NYSE-listed, clients will also have the option to take advantage of d-Quote order types, which allow for modifications or cancellations after the exchange cutoff time for market-on-close orders at 3:45 p.m. Eastern.

By incorporating the d-Quote order type into the algo, clients can have more flexibility in choosing the appropriate size of an order to place on the close after analyzing the NYSE imbalance data and placing a market-on-close order.

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