Agency-only brokerage ITG has rolled out a new algorithm that makes dark pool liquidity available to portfolio traders.
The company unveiled its Dark List Algorithm, a next-generation algorithm which brings the firm’s dark trading capacity to portfolio traders.
How does it work?
Using a proprietary optimization technique, the algorithm is able to efficiently trade a list in POSIT Marketplace and POSIT Alert without creating cash imbalances or over-trading liquid names.
“Portfolio traders are hesitant to leverage the cost-saving potential of dark pools at scale because of concerns about unpredictable execution rates that can create cash imbalances or increase the risk of residuals,” said Ben Polidore, head of ITG algorithms at ITG. “ITG Dark List is designed to address these issues with its unique approach to statistical cash management and its distinct optimization objectives.”
Dark List is currently available only in the U.S. and ITG plans to roll it out in Europe in the latter half of 2015.
Dark List lets portfolio traders control the optimization process to suit their needs by offering two objective functions: maximize execution rates under a cash constraint or use the opportunistic nature of dark pools to clean up only the most costly parts of the list. These objectives allow traders to use ITG Dark List as their primary trading tool or as a complement to risk bids or non-discretionary algorithms like VWAP.
The algo joins POSIT, POSIT Alert and POSIT Marketplace, helping traders source liquidity at an optimum price by reducing the friction that prevents list and single-stock traders from crossing with one another directly.
ITG Dark List is available on 18 OMS/EMS platforms or via ITG’s Portfolio Trading Desk.
