One of the hot topics at an institutional trading conference this week in New York City had to do with the buy-side tracking their orders as “hops along the way.” That may seem like a strange phrase, but with the complexity of executing algorithmic orders across many different lit and dark venues, buy side traders are asking their brokers for more data to gain transparency into order routing practices.
Since large orders are broken up into tens if not hundreds of pieces, and then executed across different dark pools and lit exchanges before the entire order is filled, buy side traders are not necessarily aware of all the "hops" their orders make.
While some buy-side firms are already receiving execution data back from Tag 30, a message tag from the FIX Protocol, which shows the end destination. But firms are showing interest in additional data through Tag 29 and Tag 851, according to David Hagen, VP, Global Trading Technologies for Boston-based Linedata, who attended the conference session.
Tag 29 is of interest because it would show the buy side if the broker acted on an agency basis or as principal or cross agency or cross principal, said Hagen. The other tag is No. 851which would indicate, if “the broker added liquidity, removed liquidity or routed away or added to an auction,” said Hagen.
Order management and execution management systems (OMS/EMS) are able to capture and store the FIX tags. However, taking all of this data into buy-side shops and systems could be burdensome. “The jury is still out on if this is going to take off,” said Hagen. “It’s going to be costly to deliver that data and to manage it,” he said.
During the trader conference, institutions were asked what it would do with all of this data. One buy side trader said his firm cared about the data because “it was leaving breadcrumbs” along the way. It’s not clear that buy-side firms will be doing data mining which would probably require the support of their IT departments, Hagen suggested. But this can easily turn into a Big Data problem for the buy side.
The move also suggests that buy-side firms are taking ownership of their orders and their data. Another institutional trader conveyed, “It’s my order, and I deserve to know what’s being done with it,” related Hagen.