Traders who route and use complex orders are going to be able to use Wolverines Best X algorithm for options now.
And if that isnt enough, the firm is also announcing two brand new FIX- protocol based options algorithms too – one based on volatility parameters and the other a classic TWAP.
According to Troy Googins, Head of WEX Product and New Business Development who spoke with Traders Magazine, the enhancement to Best X or options and new Vol and TWAP FIX algorithms come at the behest of clients.
So whats new? The FIX is in.
We have leveraged our existing platform applets and ported them over to FIX and our .net API so that this functionality extends beyond WTP, said Troy Googins, Head of WEX Product and New Business Development, speaking about the two new FIX protocol based algorithms. Clients wanted API connectivity and now we can give it to them.
First up is the new Volatility algorithm for options. This algo takes the underlying stock reference and option reference price and works child orders. As Googins explained, traders also disclose either their volatility parameters, time frame to work the order, or both and then the algo does the work.
The back end can use our sweep logic to ensure we get access to all the liquidity we can without disclosing the traders intentions, Googins said. It will work an order based on a specified volatility level and allows clients to specify how aggressively the order should be worked in the market.
The Time Weighted Average Price (TWAP) algorithm for options works like its equities counterpart except it is for simple and complex option orders and uses API/FIX delivery. The algorithm looks at the time frame for what the trader sends to WEX and then, as Googins explained, the algo slices up the parent order so as to randomize the child orders to get the fill.
The trader sends us a limit price and time frame and we slice up the order so as not to spill info into the market, Googins added.
The two new to FIX protocol algorithms took around three to six months to fully vet and become operational.
What about Best X for options?
Best X uses WEXs proprietary liquidity and trend models. According to an earlier interview with Traders Magazine Googins explained that Best-X automatically adjusts the aggressiveness of execution and monitors each order to continuously balance price and liquidity.
But what is new here is that Best X for options now has the functionality and capability to handle multi-leg or more complex orders. Prior, the algo could only handle a single leg or option order. Best-X options can also be used for spreads providing the ability to probe for liquidity and price improvement in the Complex Order Book (COB) auction mechanisms for client orders.
Googins told Traders Magazine that users of the single-leg version of Best X wanted the ability to trade more complex orders and requested the additional trading capability.
By adding to our options algorithm offering, we have enabled clients to use a broader range of strategies to combat a more complex options market landscape, Googins said. It took only about one month for WEX to alter Best X for multi-legged strategies.
WEX algorithms are currently available via WTP, FIX and through other FIX-compliant EMS or OMS providers.