September 20, 2011

Agency broker Investment Technology Group (ITG) launched algorithms for Mexican equities as part of its expansion of trading capabilities into the Latin American region.

ITG already had algorithms for Brazilian equities, the largest stock market in Latin America, so “Mexico seemed a logical spot to go next for the region,” said Eric Blake, director of international sales and trading in New York, in an interview with Advanced Trading. Mexico, like Brazil, has been evolving their infrastructure to support electronic trading, Blake noted.

ITG is offering three algos in Mexico —its flagship Active algorithm as well as volume weighted average price (VWAP) and time weighted average price (TWAP). Active is an implementation shortfall strategy that appeals to institutional traders. According to Blake, ITG’s institutional client base has requested more algorithmic capabilities within the region and hence, ITG added on with Mexico, he continued.

Brazil and Mexico are attracting 80 percent of the order flows coming into the region, he notes. Institutional accounts from the U.S., Canada and Europe are trading with ITG’s algos into the Latin American region. ITG is expanding its algorithmic offering in Latin America at a time when emerging markets have been quite volatile over the past couple of months. “The volatility has increased our flow during these time periods,” he said.

The firm has customized its flagship Active algorithm for the structure and spread profile of the Mexican market. “Given that spreads can be significantly wider in Brazil and Mexico, that has lent itself to work well with our Active strategy which seizes trading opportunities when price, spread and liquidity are advantageous to the trade,” explained Blake.

The Mexican algos complement ITG’s suite of four algos for Brazil, including Active, Flexible Participant, Volume Participation and the recently added Peg & Pounce algorithm. Peg & Pounce enables traders to take liquidity opportunistically when size is available and supply liquidity passively when liquidity is not available.

The algorithmic trading team in New York is developing all the algorithms for Latin America. The algo team reports into Jeff Bacidore, managing director and head of algorithms at ITG, who joined the firm this summer from Goldman Sachs Asset Management.

With the addition of Mexico, ITG now offers its algorithms in 35 markets across the Americas, Asia Pacific and the EMEA regions. Turning to the future, Blake said ITG is considering new strategies that will fit the marketplace in 2012. “The majority of our clients are well versed in the electronic space so providing them with algorithmic solutions in emerging markets like Brazil and Mexico has been attractive to them,” said Blake.

Institutional traders can access the Latin American algos through ITG"s Triton execution management system as well as other popular EMSs and via FIX protocol connections.

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Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in ...