We have some thoughts about the importance of routing analysis in the wake of the Virtu SEC action.
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We find that traders lean heavily on VWAP algos when there is adverse momentum. Is this the right call? Jeff & I have some thoughts…
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The mechanism of PureStream is unique, allowing traders to select a participation rate based on a price and shares of trades that occur in the broader market. Although a significant percentage of the fills reference lit trades, our analysis revealed that fills through PureStream users enjoy little to no adverse post-trade cost, which is a significant improvement over the cost that the original source trade incurred. In general, fills completed through PureStream incurred far less post-trade cost than than trading on exchanges and in traditional dark pools. If PureStream is integrated properly, it can provide traders with a significant benefit, especially if counterparties can be found in difficult to trade names.
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Retail may never have it better, but we can’t say the same for institutions. The analysis shows that Payment for Order Flow (PFOF) has taken valuable liquidity out of the marketplace. The result is significantly higher costs and volatility in “retail” names for mutual funds and hedge funds. With retail share at over one-third of market volume, the problem is too big to ignore.
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In an intellectual sleight of hand that would make Harry Houdini proud, some of exchanges participating in the debate surrounding the transaction fee pilot have engaged in fear mongering and flawed analysis, even presenting enormous investor cost estimates ($1 billion! $1.5 billion!) by relying on misleading single factor analysis.
In newest our blog post , Babelfish cuts through the noise and the conflicts to inject some sanity into the conversation.
Please join us as we examine some of these assertions and show how optimizing for a single factor may actually result in increased costs and lost alpha.
*** NOTE: We will be scheduling a webinar in the coming weeks to show you how transaction fees impact you without waiting for the pilot. Please contact us at learnmore@babelfishanalytics,com to reserve your spot. ***
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Even though I am using an algorithm named “Dark & Sneaky”, why do I still incur more information leakage than I should? A discussion of how algorithms are no longer able to maintain their stealth and how should buy-side traders deal with it.
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