Investors using algorithmic trading tools are seeing significant improvements in performance over alternative execution strategies, according to an analysis of deal activity at 200 hedge funds and asset managers conducted by EMS vendor TradingScreen.
The review found that algorithms generally outperform similar trades completed without the use of algorithms, "both to the absolute result achieved in terms of execution prices and also the consistency of those results", says TradingScreen.
However, performance levels can vary, even among the most straightforward algorithms. Direct comparisons are complex, says the firm, "but it seems clear that some algorithms consistently perform better in certain market conditions than others".
TradingScreen is preparing a new 'TradeMetrics' service that will enable buy-side clients to compare their performance against peers by trading segment and that of the algorithms they use or provide, against a unique universe of comparative data and market conditions.
"Buy-Side clients in particular have been asking for some time that we help them understand the dynamics of their trading performance and the value they are delivering to the investment process," says Michael Chin, president and head of global sales at TradingScreen.
The TradingScreen platform is used to link asset managers to sell-side broker-dealers for multi-asset trading. The firm has just struck a deal with Credit Suisse to add the broker's FX Algos to its currency trading platform, marking an extension of automated trading tools into the OTC markets.
Frits Fiene, partner of TradingScreen client World View Investment Management, welcomes the move: "Having access to Credit Suisse AES FX Algos available on TradeSmart provides us a great tool to participate in the market and capture the biggest intraday swings and design a tailor-made strategy for the day."