Best Execution: Buyside Focus – Bespoke Algos

By Jen Fagenson

April 17, 2019

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Best Execution’s Chris Hall speaks with James Doherty, DASH’s Head of Equity Product, and others on whether brokers can tailor their models to meet customization demand. 

Responding quickly and effectively to client customization requests is now a base level requirement for today’s execution brokers. According to a Greenwich Associates survey last year, brokers expect almost half of their buy-side clients to seek some kind of customization of order-handling logic during 2019, versus just over a quarter in 2017.

The powerful forces propelling demand for customization suggest differentiated execution services will only become more important, undermining business models that fail to invest in top-tier capabilities.

James Doherty, head of equity product at DASH Financial Technologies, says dark liquidity cannot be ignored. “But you can manage the information leakage arising from the pursuit of liquidity. Buyside firms are measuring performance much more precisely and are highly focused on identifying and refining tactics to optimize outcomes, i.e. how and when to split orders across venues.”

This is leading to greater popularity of ‘I would’ functionality, for example, which allows traders to capture liquidity on additional venues, whilst working the lion’s share of a large order on a block-friendly platform.

“Investors are willing to take the opportunity to grab liquidity wherever it arises, but they are also using pre-trade analytics to get a better idea of what it might cost them,” says Doherty. “It’s now possible to detect patterns that might only last a few seconds, which still may be sufficient for an algo to capture much-needed liquidity.”

To read the full article, click here.