Fast Forward for Algorithmic Trading
First Published in Automated Trader Magazine Issue 07 October 2007
Algorithmic trading is on the brink of a new era of standardisation that will accelerate time to market, according to John Goeller, Chair, FPL Algorithmic Trading Working Group and Director of Portfolio and Automated Trading, Merrill Lynch.
John Goeller
Virtually all major broker-dealer/sell-side market participants recently announced support for a new initiative around algorithmic trading. Surprisingly enough, the initiative did not involve some new algorithmic trading strategy with a catchy name, the emergence of yet another dark pool or another consortium looking to solve the latest challenge. What could it be you ask? The answer is FIXatdlsm – FIX Algorithmic Trading Definition Language – an emerging standard developed for the benefit of buy- and sell-side firms. And, if you haven't stopped reading at the word ‘standard’, this new language will deliver advanced support for algorithmic trading, enabling buy-side firms, including institutional and hedge funds, to access new order types within a significantly reduced timeframe.
The distribution challenge
The boom in algorithmic trading began in the U.S. equities market in 2000, partly in response to changes in market structure. When the minimum tick size changed from 1/16ths to pennies, it caused a reduction in the spread between bids and offers and forced people to trade in smaller increments. Ideally, to efficiently trade in smaller increments you need to use a computer, hence the expansion of algorithmic trading.
Having a large number of buy-side fi...
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