The buy side now has more flexibility when it comes to setting how aggressively it wants to seek liquidity.

Barclays has revamped and reprogrammed its Hydra algorithm – which is the bank’s liquidity-seeking strategy. It joins the broker’s table of other algorithms – VWAP, TWAP and IS. The algorithm’s reconfigured features incorporate Barclays’ proprietary technology as well as feedback from clients to achieve more differentiated execution styles and refined control of interaction with liquidity in the market.

According to Joe Mecane, Head of Equities Electronic Trading at Barclays, the objective of the new version of Hydra is to minimize slippage from the arrival price while seeking additional dark liquidity according to the trader’s level of urgency.

“Users should notice a marked difference between the execution styles in this new version of Hydra,” Mecane said. “In particular, they should see a difference between the participation rates and the percentage of fills from passive, midpoint and aggressive order placement, in line with their chosen execution style.”

So what is new in this upgraded version of Hydra?

“Hydra is our hallmark liquidity-seeking algorithm that marries implementation shortfall with a dark liquidity seeking component,” Mecane told Traders Magazine.

It starts with more differentiated levels of dark and lit aggression that the buy-side trader wants to utilize in seeking liquidity – termed Quiet, Neutral, Aggressive and Dark Only. What Barclays has added for the buy-side trader are standardized parameters to govern the execution framework for the strategy. These parameters determine how the strategy interacts with dark liquidity, thus enabling the configuration of more unique execution styles. Furthermore, traders can customize these parameters – allowing a trader to fine-tune the execution styles.

“With this new version of Hydra, we’re also gearing it more towards a passive style of trading,” Mecane said. “We see this move towards passive trading strategies as a general trend in the market. And Hydra gives traders more control and the ability to further customize it as they need.”

Lastly, in keeping with the broker’s philosophy of its traders serving as consultants, a buy-sider can work with his sell-side counterpart and the bank’s analytics team to develop a data-driven approach for customization.

Additional enhancements made to Hydra:

• Restrike logic to reset the benchmark arrival price as market price deviates
• New Dark Step Ahead styles that control how much of the remaining order to submit to dark order placement logic
• A Dynamic Min Quantity for hidden posted orders determined daily for each symbol-venue combination based on historical data
• A new ATS-only posting option which excludes hidden liquidity on lit exchanges for the purposes of dark order placement. Hydra will look in Barclays’ own LX pool first and then others.
• Pounce on Marketability function to take outsized lit liquidity when certain conditions are met. This means essentially if a block or larger than normal chunk of securities is available at a given time and in keeping with the trader’s goals an algo’s schedule, Hydra will grab the securities.

This new configuration of Hydra is currently running in beta alongside the older version of the algorithm. However, Barclays plans to make this new version of the algorithm the default offering of Hydra on January 23, 2017. If a client doesn’t want to use the new version, the broker will still offer and support the older version and make it available for use. Traders who want the new version of Hydra before January can be switched over immediately.

Mecane said that according to results from early adopters and internal testing, the new configuration is behaving as intended, with greater differentiation across urgency levels.

“This release of Hydra is a reflection of our ongoing commitment to continuous improvement, incorporating our clients’ feedback and our experience as we invest in our platform and innovate new products.”