Bank of America has launched a new 'adaptive' algorithmic trading program, dubbed Instinct, for dealing in less liquid small to mid-cap stocks.
BoA says Instinct represents a new breed of adaptive implementation algorithms, which analyse and react to market data in real-time during the course of the trade.
Unlike earlier generations of algorithms that trade along fixed, predetermined trajectories, Instinct uses a proprietary real-time estimation of available liquidity to continuously modify its execution strategy throughout the lifetime of the order.
Robert Almgren, managing director and head of quantitative strategies for equities, BoA, says adaptivity is the "next frontier in algorithmic trading".
"The ability to instantaneously change execution strategies during the course of a trade will give traders greater control over the outcome of that trade," says Almgren.
The bank says the Instinct algorithm is especially suited to less liquid small and mid-cap stocks as it allows traders to identify and seize liquidity as soon as it becomes available.
"Instinct will be an exceptional productivity tool for our clients, as it aims to reduce workload and mitigate execution costs by allowing traders to find liquidity," says Almgren.
The algorithm is the ninth available through BoA's Electronic Algorithmic Strategy Execution suite of electronic trading tools.