Traders Seek Simplicity

Terry Flanagan

While electronic and algorithmic trading continues to become more advanced, some traders prefer to keep it simple.

“Clients had experienced confusion from different firms offering similar algorithms,” said a New York electronic trader. “A client might have five firms offering a total of 25 algorithms, and there was confusion as to what the end goal of each strategy was. By shrinking the input requirements, it ends up making the decision process for clients simpler.”

The simplification process is one that is a joint effort on the part of the broker and the buy side client. With the markets becoming increasingly global, traders look for the same consistency across borders.

“A lot of the principles of algorithmic trading that we have learned in the U.S., Europe and Asia can also be applied in Latin America,” said an electronic trading head. “However, local market nuances clearly need to be taken into account as well. To build the best algorithms in these markets we have found that we need our algorithmic developers from a developed market like the U.S. or Europe to work closely with traders from our local office in Mexico City or Sao Paulo.”

“If the algorithms were developed completely in the local market they could run into the same problems we solved for years ago in the U.S.,” the trader added. “Conversely, if we built LatAm algorithms completely in New York, we ignore the years of hands-on trading experience of our local staff. Getting this balance right is the key to creating the best product.”

There’s been a very broad increase in the amount of interest in Brazil and Latin America over the past several years. As clients in the U.S. and Europe further look to trade in Brazil, whether it’s equities or derivatives, they desire to use the same tools, including having direct market access and the same suite of algorithms.

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