Race Is On for Alpha-Based Algos
For Wall Street, incorporating alpha into strategies is the next big thing
U.S. Regulation National Market System mandates that broker-dealers and exchanges ensure best execution, but, when more than one displayed venue has the same price, many institutions rely on algorithms to find an edge, or search the dark books for a better fill. As such approaches have become increasingly common, some market participants are pointing to alpha as the next algorithmic development--for firms that can afford it.
Today, electronic routers and their algorithmic cousins cast bids and offers across the market so rapidly that best price is often available on multiple platforms. Consequently, trading tools consider a destination’s speed, stability, fees and other technical factors, as well as plying dark pools for midpoint price improvements. But even that has become run of the mill.
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