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Latest PDQ Trading Algorithms Take Aim at Costs, Speed

In a low volume equity trading environment, PDQ says its new algos will help retail and institutional investors cut costs and speed up their executions.

Since equity trading volumes are in the midst of a prolonged slump, the primary goals for any trader - institutional or retail – have largely become keeping costs in check and making their workflows more efficient.

With active stock trading on the wane at the moment, PDQ ATS President Ed O'Malley suggests it was an ideal time for his firm to roll out a set of algorithms aimed at helping traders accomplish both goals.

The firm, whose platform provides traders access to 75 broker-dealers and 15 vendors - including Fidessa and Bloomberg, - today announced the rollout of AlgoSuite, a set of order types aimed at bringing down costs while helping traders execute more quickly. PDQ says its latest offering enables traders to gain all the benefits that come with being colocated, minus the typical infrastructure and networking costs that come with it. The new algos, which include three different order types, can be sent from any front-end that's connected to the PDQ ATS, the company said.

"What we're talking about here is PDQ basically holding, monitoring and managing that order in the same data center with all the exchanges," O'Malley explains. "So it's not travelling – taking the time from wherever that trader is physically sitting. It's actually within the data center at PDQ and they're taking advantage of what we've already got in place to initiate that algo."

O'Malley says that after years of working closely with institutional, retail and day traders alike, PDQ found that many still needed manual functionality to interact with the marketplace. So the AlgoSuite is designed to automate such functionality.

The new order types include AlgoWork, AlgoStop, and AlgoMid. AlgoWork is built to attain the best possible price at the National Best Bid Offer (NBBO), the company says. According to O'Malley, AlgoWork starts by posting an order on the bid or offer and then uses algorithmic intelligence to pinpoint the best time to aggressively cross the market.

"That process alone takes at least a second and in some cases longer than that," O'Malley explains. This order type is ultimately aimed at helping a manual trader cover positions in a more cost effective manner, he adds. It's also built to help a trader capitalize on rebates when possible, and remove liquidity when it's absolutely necessary.

"We think there's a lot of benefit to that and we're not aware of any other markets or venues that offer this type of strategy," O'Malley says of AlgoWork. The AlgoStop strategy, meanwhile, is designed as an intelligent stop loss order that covers positions in a way that will stop losses from being executed until necessary, the company adds. And AlgoMid is built to maximize queue position on midpoint orders by using low latency infrastructure to place orders at the earliest possible opportunity, PDQ said.

The PDQ platform has grown in popularity with the asset management community since its 2008 debut, but O'Malley concedes that it will take a while for its latest offering to penetrate the retail side of the marketplace.

"Certainly with the active day trader and the institutions, we have those connections set up," O'Malley says. "It's very simple for them to launch these algos. On the retail side that's something that might take a little longer but certainly it's going to benefit them as it does the other types of traders."

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio

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