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Maxim Group Steps into Algorithmic Space via Fidessa BlueBox

Moving into the algorithmic trading space while retaining control over its order flow, New York-based Maxim Group LLC, has gone live with Fidessa BlueBox, a suite of algorithmic trading strategies from Fidessa Group. Maxim Group has been a sell-side client of Fidessa's order management system since March of 2006 in offering OTC and listed trading to their clients, according to Martin Hakker, EVP

Moving into the algorithmic trading space while retaining control over its order flow, New York-based Maxim Group LLC, has gone live with Fidessa BlueBox, a suite of algorithmic trading strategies from Fidessa Group.

Maxim Group has been a sell-side client of Fidessa's order management system since March of 2006 in offering OTC and listed trading to their clients, according to Martin Hakker, EVP marketing at Fidessa.Now the brokerage firm is leveraging four algorithmic strategic benchmark strategies: stealth, which is the same as time weighted average price (TWAP), volume weighted average price (VWAP), percentage of volume and arrival price.

"The rollout was well received from a technical performance (standpoint) as well as the performance of the strategies themselves," says Hakker, commenting on the Maxim rollout.

Rather than route its equity orders to a third-party broker's algorithms, and potentially lose control over its order flow, Maxim Group chose to go with Fidessa BlueBox, which offers industry-proven algorithms.

"With BlueBox, we have been able to quickly move into the algorithmic trading space by leveraging industry-strength algorithms without the need to build and maintain our own technical infrastructure," stated James Orazio, president at Maxim Group in the release.

According to Jim Dyer, head of equity trading who is also quoted in the release, "We were so pleased with Fidessa's BlueBox strategies that we asked Fidessa to roll it out to the entire desk after just two days of pilot use."

One of the benefits is that sell-side traders "can interact with these strategies, that it's not a black box," says Hakker. "They're able to pause orders, to step in and they see the market changing and they can see the slices changing before they go out," he says.

According to Matthew Rowley, global product manager for BlueBlox, this approach allows the broker to internalize the algorithms as opposed to routing out the order to an external broker. This is an alternative "to routing to a third-party algorithmic provider where they're not privy to the strategy itself," adds Hakker. "They don't' see whether it's going to slice additional pieces off and ultimately, they either leave it or cancel the whole (trade) and bring it back," he says.

"By internalizing the algorithm, they're getting credit for the volume in the market as opposed to the third-party provider of that algorithmic solution," says Hakker. "Now they can regain this control of the trading and print that volume as traded they're doing in the market," he adds.

Fidessa introduced BlueBox to the U.S. last June and since then has launched the product globally. It currently has three clients live in the U.S., including Maxim, one in Europe and one in the Far East as well as a backlog of clients that it's bringing live, says Hakker.

According to Rowley, who designed the algorithms based on numerous conversations with traders, the clients have transparency into how the algorithms work. For example, when BlueBox is slicing an order into the market trying to achieve the average benchmark, the trader knows when the next slice will occur. "We give them feedback from how far away from the volume or how close the VWAP they are. They know intimately how well or badly the (strategy) is performing," he says.

Since none of the algorithms are more intelligent than the traders, say Rowley, Fidessa is offering a hybrid approach where the trader can let the algorithms take care of all the slicing out which is the time consuming and mundane routine part, and then intervene when they see something in the market. "The traders are achieving better performance because they can interact with what a black box can achieve," he says.

BlueBox is fully integrated within the Fidessa OMS and EMS. "It's leveraging the compliance, the market data and the connectivity into the market, so the traders are comfortable with the screens that show them the orders within BlueBox," Hakker notes.

For clients that want to build their own strategies with their PhDs behind it, Fidessa offers the BlueBox Framework. Going forward, Fidessa is looking to roll out closing price strategies as well as a strategy to interact with dark pools and disclosed markets. 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 the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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