ITG Algo Aims at LatAm Market Close


Buy-side investors that trade in Latin America, particularly in the final minutes of the trading day, have a new electronic tool.

Independent broker ITG has created two new algorithms designed to assist traders find liquidity in the Brazilian and Mexican stock markets. While algorithmic trading is making inroads into the Latin American stock markets, these two new algos are designed specifically for trading during the closing auctions and final minutes of the trading day.

Eric Blake, managing director and oversees Latin American operations at ITG, told Markets Media in an interview that Brazil and Mexico were prime candidates for algorithms such as these since these markets collectively represent over 80% of MSCI Latin America.

“These are the largest markets in LatAm and where we have concentrated our focus,” Blake explained.

Similar to equity trading in the US, the majority of trading activity takes place during the final minutes of the trading day. According to Blake, the closing auction in Brazil can represent 10% to 15% of total average daily trading volume, while in Mexico the closing print can encompass 8% to 10%.

“It can be difficult to manually trade at the close,” Blake said. “After listening to our clients concerns we have developed a value-added solution.”

How do the algos work?

The Brazil Close and Mexico Close algorithms incorporate order imbalance information and adapt to changing intra-day market conditions to help capture the substantial liquidity available late in the trading session and in the closing prints of these key markets. A buy-side trader simply places his order into the algorithm and it does the rest.

In Brazil, the algos work during the final five minutes of the closing auction – 3:55pm to 4 pm EST. In Mexico, the close is defined between 3:40 pm and 4 pm EST when a 20 minute VWAP algo makes the closing calculation.

The algos work within the two countries’ securities – not to trade interlisted securities.

After consultation with institutional traders, the algorithms took approximately six months to construct, Blake explained. The algorithms, now in full operation, were beta tested by a select group buy-siders working with ITG, Blake said. Now it is in full operational use by four buy-side firms.

These algorithms join ITG’s standard stable of electronic trading tools such as VWAP, TWAP, Implementation Shortfall and liquidity seeking strategies in use in Brazil and Mexico. Latin American traders also have access to the firm’s Posit Alert on exchange block-crossing pools for Brazil and Mexico.

Blake noted that in addition to the new Close algorithms, ITG is preparing to launch electronic direct market access (DMA) for Colombian equities this fall.

“We are always considering opportunities in other markets,” Blake said. “We’ve rounded out our suite for Brazil and Mexico – but are still open for expansion there.”

ITG’s Latin America algorithms are available via the firm’s own Triton execution management system and also via FIX connection to the broker from third-party trading systems.


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