09.26.2011

Mexico Gets Custom Algos

09.26.2011
Terry Flanagan

ITG rolls out trading programs that factor in wider spreads in emerging markets.

Institutional asset managers are deploying algorithms designed to reduce market impact, maximize execution quality and improve trading performance in the Mexican equity market, as regulatory and technological changes accelerate the move towards electronic trading in the region

“Sophisticated global asset managers are increasingly using algorithms as workflow and liquidity management tools, and as they invest in emerging markets they want to bring these same tools with them,” Eric Blake, director of international sales and trading at ITG, told Markets Media. “Brazil and Mexico combined represent over 80 percent of total trading volume in Latin America, so they are the biggest destinations in the region for institutional investors.”

Investment Technology Group (ITG), an agency research broker and financial technology firm, has launched algorithms for Mexican equities, including the proprietary Active algorithm, which has been customized for the structure and spread profile of the Mexican market.

“Our algorithms are tailored to the market structure and dynamics of each individual market,” said Blake. “In the case of emerging markets such as Brazil and Mexico, our algorithms factor in the wider spreads. For example, in Mexico, average bid/ask spreads can be up to three times wider than those in the U.S. equity market.”

Regulators and exchanges in Mexico and Brazil have taken steps to facilitate cross-border securities trading, further hiking demand for trading algos.

“The BM&F Bovespa in Brazil and the BMV in Mexico have taken bold moves in the past few years to stay in line with market trends and client demand by providing co-location at the exchange-level, and partnering with groups like the CME and Chi-X with multi-asset and FX platforms,” Jackson said.

The algorithms are available via ITG’s Triton execution management system as well as other widely used trading platforms and via FIX connection.

The Mexican algorithms complement ITG’s growing Latin American trading capabilities.  ITG offers a full suite of algorithms for Brazilian equities, including Active, Flexible Participation, Volume Participation and the recently added Peg & Pounce algorithm.

Peg & Pounce empowers traders to take liquidity opportunistically when the size is available and supply liquidity passively when liquidity is not available.

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