âThis statistic is significant on two levels,â said EdgeTrade CEO, Joseph Wald. âItâs in keeping with what we announced earlier in the year, demonstrating consistency in our technologyâs ability to source ample liquidity in non-displayed markets and through reduced market impact, provide back to the trader a higher return in terms of lowered execution costs.â (EdgeTrade previously reported, in April, a year-to-date, daily average of 28.9 percent of client executions in the dark.) âIt is FANâs smart order execution technology that is driving this success,â said Wald. Smart order execution, a term and category breakthrough of next-generation algorithms originated by EdgeTrade in 2005, is designed to optimally and anonymously fill orders electronically through high-speed market connections that dynamically interact with streaming quantitative, analytical and adaptive (to real time executions) methodologies.
âThe latest finding is even more noteworthy given its timeframe of sharp market volatility, clearly pointing to a major shift underway,â said Wald. âNo longer do traders, during times of heavy volatility and a perceived dearth of liquidity, feel restricted to only seeking capital commitment. With the right tools and market connections, they are seeing their orders filled in the dark without information and price repercussions systemic to negotiation with a trading desk. The import of this change in attitude and behavior cannot be underestimated; the market is truly evolving and we have the technology to enable traders to exert greater control and directly effect a more advantageous outcome in their favor.â
âDark algorithms provide the buy-side trader with a key advantage by offering rapid exposure to a wealth of hidden liquidity through the use of sophisticated, intelligent technology,â said TABB Group Senior Analyst, Adam Sussman. âHowever, the buy-side needs more information about where orders are routed, why they are routed there and exactly how much of its order flow is being executed in the dark.â
EdgeTradeâs smart order execution strategies encompass FAN, Covert and Sumo. FAN simultaneously sprays aggregated displayed and non-displayed markets, and then continuously moves an order in line with shifting liquidity until best execution is fulfilled. Covert, a tool for institutional traders who seek to capitalize on the benefits of sending electronic orders to dark pools only, is an extension of FAN. Launched in 2005 as the antidote to a market order, Sumo is an aggressive, time-sensitive strategy designed to get trades done quickly while minimizing market impact and information leakage.
âNumerous traders conveyed to us during peak days of market volatility, how they never would have believed it possible to obtain a fill rate and execution quality through algorithmic technology,â said Wald. âThey now know itâs possible and, as expressed by them, will never go back to old methods of conceding liquidity at the cost of having less control and inviting unwanted exposure to information leakage and an inferior execution.â
âA corollary point,â said EdgeTrade President, Kyle Zasky, âis that liquidity once considered scarce during volatile market trading, has now been made more accessible and actionable through the proliferation and active use of dark pool algorithms.â âThis trend is coming full circle with the market volatility witnessed over recent months. What could have been a summer and early fall of discontent for many traders has instead become their epiphany.â
EdgeTradeâs algorithms are available through Execution Management Systemâ¢, the firmâs independent, agency-only platform for single stock and basket equity orders, as well as a number of buy-side and sell-side trading and order management systems, including: Bloomberg, Charles River, ESP, Eze Castle, Fidessa, Longview (Linedata), Macgregor, Mixit, Moxy (Advent), Neovest, NYFIX, thinkorswim and Tradeware. In addition to the smart order execution algorithms, EdgeTradeâs canon of agency-only strategies encompass a growing roster of benchmark and participation tools: Arrival Price, VWAP, TWAP, Volume Tracker, Liquidity Paced and 10b-18 (corporate buyback).