Quantitative Approach with a Human Touch

Issue 04 January 2007
Automated Trader Magazine

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?

Brian Schwieger

Brian Schwieger, Head of EMEA Algorithmic Execution and Trade Analytics, Merrill Lynch

From EMS through to post trade analytics and Execution Consulting, users need an individually tailored solution that meets their needs. Understanding this has driven us to constantly evolve our algorithmic strategies, develop new trade analytic tools, expand into Execution Consulting and develop strategic partnerships with Portware and ITG Block Alert.

t's important to remember that tailored solutions include the way in which client information is conveyed and handled. Anonymity has always been a much discussed topic in this industry, but it is generating more interest as brokers increase crossing capabilities to maximize opportunities within their own "dark pools". Anonymity is an important part of any tailored package, and that relies on well defined and executed infrastructure security. This is something which we take very seriously in designing our platforms and handling electronic flow.

Approach to Algorithmic Trading

From the very beginning of the design process, our approach to Algorithmic Trading is to combine detailed quantitative research with human trading skills. We have experienced quantitative researchers throughout the world studying the microstructure of individual stocks. Their job is to find ways of incorporating new data and intelligence into the behaviour of the algorithms. At the same time, we have an extensive consultative process with our own traders, discussing trading tactics and strategies which are then incorporated back into the algorithms. A great example of this is our current work on enhancing the behaviour of strategies used for trading European mid and small cap stocks. ...