Now the buyside can monitor and rank its brokers’ algorithms and switching engines in real-time.
Kissell Research Group now offers a measurement tool, dubbed Algorithmic Decision Selection Tree, which provides real-time broker performance on a broker and its algorithms. This gives institutional investors a way to measure its brokers’ algorithmic performance while trading. The measure is part of its transaction costs analysis offering TradeMetrics. Buysiders input into ADST such data as the security, order size, algorithm, and market conditions to get a result.
The goal is to help buysiders more easily see the benefit realized by changing algorithms, algorithmic parameters, or brokers, before the completion of the order. Investors can now see how each broker and his offerings fare, and either hold them accountable or change strategy based on performance, Robert Kissell, president said.
“This enables investors to route orders and designate trades based on the best performing brokers and least cost algorithmic providers,” Kissell said. “This is an advisory tool [Trademetrics] and can also serve as the underlying intelligence embedded into the investor’s actual switching engine.”
The buyside trader can incorporate this algorithm decision tool into his order or execution management systems and it then can function as a switching engine in theory, Kissell said. Once the buyside trader enters his investment goals and trading preferences, the algorithm decision tree then provides the best broker and algorithm for the order.
“The sellside isn’t able to make a best execution decision on behalf of the buyside unless the buyside PM provides them with proprietary investment information and data” Kissell said, “TradeMetrics allows the PM and trader to maintain anonymity and achieve best execution.”
