Abel Noser Bets on Continuous Optimization

Doug Rivelli

Abel Noser, a provider of multi-asset trade analytics and agency-only brokerage services, has been utilizing, back-testing, and optimizing trading algos for decades. The firm was closely involved with the development of the original VWAP (volume-weighted average price). “The first execution based on the VWAP was in 1984 for the Ford Motor Company, and was run by James Elkins, then head trader at Abel Noser,” commented Doug Rivelli, Abel Noser’s President. “In 1985, VWAPs were very revolutionary and really changed the way that people traded. In 2022, we’re doing it again with START,” he said.

START is Abel Noser’s new platform that generates custom execution strategies that leverage client-specific historical trading data. In August 2021, Abel Noser acquired Trade Informatics, a New York based firm offering equities trade cost analysis (TCA), consultative solutions, and a broker-neutral systematic execution platform. Trade Informatics’ brands including TAP Trade Analysis and START Systematic Trading were added to Abel Noser’s product lineup.

Akis Georgiou, Abel Noser’s Head of Quantitative Execution Sales, praised START, explaining that the system segments historical orders according to their key drivers of performance and calculates the trading strategies that would have produced the best outcome. “The resulting strategies then undergo rigorous out-of-sample testing to ensure future applicability,” he added.

Rivelli said that depending on the extent and complexity of client trading data, the platform can generate upward of 20 target strategies. “To effectively utilize the strategies, we have developed an automated framework which employs a sophisticated rules engine,” he added.

Rivelli remarked that at the core of their offering is Abel Noser’s robust trade cost analysis business, adding that other brokers typically don’t have the history and richness of client-specific trading data or the infrastructure to perform the level of analysis that they do. “We’ve been in business for a long time and have been involved with algos practically since the beginning,” he continued. “Without a core TCA framework, you can’t go to that next step of generating automated trading strategies that are informed by each firm’s historical trading patterns and preferences. This is what makes us very unique,” he said.

“Typically, the algo suites offered by a lot of the brokers are relatively static,” Rivelli said. “We are constantly adjusting those algos as we capture more of the client’s trading data, especially as time goes on. This continuous optimization is part of the offering and is also very distinctive.”

Georgiou noted that their clients can choose to use the platform in a broker-neutral manner. “In addition to being a broker, we are a trading technology and analytics provider,” he said.

“Abel Noser’s philosophy remains the same today as the day the firm opened its doors: ‘offer best execution with low trading costs’. “We do this through careful pre-trade analysis and planning, predictive technologies, adaptive execution strategies, comprehensive post-trade analysis, and the continuous optimization.”

In terms of volume being run through the START platform,” Rivelli estimates, “back of the envelope, adding everything together, we’re probably trading close to $500bn in notional a year.”

According to Rivelli, the START platform has significant adoption in the institutional community. “While every client is different, we find that by using START, our hedge fund clients often save somewhere in the range of 4-10bps, and our larger institutional clients are in the range of 15-30bps savings,” he commented.

Akis Georgiou

“Automation is another factor to consider in terms of differentiation,” said Rivelli. “The platform automates the algo selection process, thereby allowing traders to focus their attention on harder to trade names.” Rivelli believes that the next-gen development of optimization technologies will revolutionize the institutional electronic trading sector.

Georgiou also said that Abel Noser is heavily involved with regulatory concerns, noting that institutional traders have a “fiduciary responsibility to achieve best execution.” To do that, he continued, “they have a need to explore new methods of trading and new ways to analyze the enormous amount of data being produced. The START platform provides a best-ex process that wasn’t previously available.”

Rivelli said that the firm’s focus for this year is on expanding its START offering. “In addition, the firm is working to better optimize its block execution capabilities and access,” he said. “We’re researching volume anomalies and providing better insight into the value of capturing blocks.”

He added that Abel Noser is also rolling out the START platform in conjunction with MWBE (minority and women-owned business enterprise) brokers to allow their clients to achieve best execution while achieving their MWBE/ESG targets. “One of our objectives is to supply the world’s best investment and execution services to such programs around the country,” he said.

“We are promoting START to broker dealers as a way for managers to proactively meet diversity and inclusion goals while mitigating best execution risk in an increasingly challenging electronic trading environment,” he concluded.