Trading Technology

09:57 AM
Phil Albinus
Phil Albinus
Commentary
Connect Directly
Twitter
RSS
E-Mail
50%
50%

Wait Before Using That New Algo

When it comes to using new trading algorithms, the buy side resembles kids standing around the deep end of the pool. No one wants to be the first to jump in.

While researching a story about the the trustworthiness of broker-dealer trading algorithms, one former buy-side and sell-side trader revealed what he thinks of new trading formulas from well-respected broker-dealers and sell-side firms.

I asked if he tests outside algos before using them. Here's what he said:

Trader: Whenever I was going to use a new algorithm, I wouldn't touch it for the first six months until they work all the bugs out.

Advanced Trading: Really? Back when you were a buy-side trader?

Trader: Yes, even on the sell side when you are offered an algo, you shouldn't touch it until all the bugs are worked out.

Six months?! I had assumed that once a new algorithm comes out that traders jumped on them the first chance they had but according to a few people I interviewed, no one wants to be the first to use a brand new formula. Also, don't algos go a bit stale? When Credit Suisse, Goldman Sachs or Deutsche Bank comes out with a new trading formula, it sounds like only the most risk-friendly of traders would use the new algorithm.

It reminds me of my kids standing outside the deep end of the pool of the swim club we belong to in Westchester. It may be hot outside and the water looks inviting but no one wants to be the first one to jump in.

No, thanks, they appear to be saying, you go first.

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio
Comment  | 
Print  | 
More Insights
More Commentary
Why Settle for Less in the Front Office?
Recent research shows that sell-side firms are less than satisfied with their order management system (OMS) technology. Many front offices, however, continue to make do with their current solutions. Are they selling themselves short?
BYOD Policy: Don't Reinvent the Wheel
Financial firms still feel overwhelmed by BYOD risks and challenges. But these can be addressed by a good policy, and the guidelines are already out there.
The BYOD Challenge
Having a policy in place to manage mobile devices used by employees for work purposes is necessary in this current day.
Getting Onboarding Right in the Age of the Customer
Disparate “Frankenstein” systems slow down the onboarding process and impede customer service, says Pegasystems.
Performance Monitoring Key to Smooth Infrastructure Modernization
As banks consider how to shift infrastructure and storage solutions, they can’t afford to lose visibility into performance.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - July 2014
In addition to regular audits, the SEC will start to scrutinize the cyber-security preparedness of market participants.
Video
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.