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Small and mid cap trade execution is a tough nut to crack. Long ‘dry’ periods, with occasional unexpected patches of liquidity, call for a very different execution style from large caps. Don White, Head of US Equity Product Development at Bloomberg Tradebook, explains how flexible high touch tools can be combined with conventional algos to provide a ‘mid touch’ solution that may produce enhanced small/mid cap execution performance.

Recent months have seen financial markets experience more turbulence than perhaps ever before. Market corrections, war in the Middle East, sub-prime crisis, bulls and bears not sure which they are, and more recently the return of the 'big style' rogue trader have caused more volatility, I would suggest, than most have ever experienced.

Proximity and trading application hosting have been some of the fastest growing areas in the evolution of automated and algorithmic trading. Mark Thornberry, Managing Director at RTS Realtime Systems, London, discusses some of the main considerations for traders evaluating its various flavours.

How have we arrived in a world where every millisecond counts? The following comment may provide some insight: "The trading world is not a generous one. The first person to the market and execute doesn’t leave behind opportunities. Because speed determines the winners and losers……" (The TABB group LLC, Trading at the Speed of Light).

Today’s buyside dealers are making more complex decisions about execution than ever before – and they are expected to justify their choices to their firms and their clients.With the introduction of the Markets in Financial Instruments Directive (MiFID) approaching,the options available to the buyside are set to expand further – along with a trader’s need to demonstrate that he or she is exercising their discretion appropriately.

A whole industry has developed around algorithmic trading. Connferences, exhibitions, publications carrying articles (not dissimilar to this one) and advertising are but a few of the activities that are providing employment and profits for many. On top of this,one must consider the costs to sell-side providers of employing project and programme managers,developers, programmers, connectivity specialists,integrators,systems, trading and support teams.Not forgetting,of course,sales people and marketing budgets needed to make the potential client base aware that the broker or bank in question is in the 'game'.

In historical terms,the speed and movement of sensitive data can clearly be seen to have delivered execution advantages. Looking back nearly 200 years, Nathan Rothschild proved the benefit of having the quickest communications system in Europe in 1815 by knowing prior to the British government the outcome of the Battle of Waterloo.The communication and anticipation of market momentum continued to develop from the first stock ticker launched on the NYSE in 1867,through Louis Bachelier’s thesis on market movement predictability at the turn of the 20th Century to the dawn of the electronic era and the development of Instinet’s DOT system. The current environment,with its proliferation of order management systems and execution management systems supported by numerous instantaneous execution choices, underlines the success of market entry strategies based on timing.

Portfolio transitions are very different from conventional asset management, but the judicious use of algorithms can still be hugely beneficial. Chris Jackson, Director, Execution Sales, Merrill Lynch International explains the nuances of using algorithms as part of transition management.

As electronic trading continues to gain ground, one of the casualties has been the reduction of personal contact. While things like data, quantitative calculations, speed to market, etc, have become essential parts of this new trading frontier, the demand for the exchange of ideas and better understanding of the market place has never been greater. What are the tools available? How do they work? How can you get the best out of them?

As the use of algorithmic trading tools has become more widespread, clients’ expectations have similarly increased. Owain Self of UBS highlights the important considerations when developing and supporting a credible algorithmic trading tool and what it takes to maintain that credibility in a constantly changing market.

MiFID has been a key focus for many months now,given both the tactical and strategic impact it will have on the buy and sell-side,and market microstructure in particular. There is no doubt the MiFID themes play largely in our plans,but they are not the only things in focus for Goldman Sachs in 2007.

New breeds of aggressive algos are being designed for active DMA traders, whilst changes in market structure are making algos essential.