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Max ADV, Minimum Impact

Published in Automated Trader Magazine Issue 24 Q1 2012

US financial stocks had a rough time in 2011, with modest gains up to mid February more than expunged by progressive losses through to midsummer, which were then compounded by a sharp collapse in early August. Kish Desai, head of EMEA Equity Sales, and Ali Mohsin, Algorithmic Trading Product Manager, at ConvergEx Group describe how a trader managed to execute an order approaching half a financial stock's ADV on August 8th - one of the most volatile trading sessions of the year.

The Scenario: It is the afternoon of Friday August 5, 2011. The manager of a UK based hedge fund has been tracking CME for some weeks and is looking for a buying opportunity. The stock has been strong recently relative to the XLF Financial Select Sector ETF, of which it is a component. While XLF has in the past week comprehensively taken out both its two previous lows for the year (which occurred in early June and mid July), CME has to date remained comfortably above

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