Question of the Week - March 15th 2016

How do traders employ algorithms over the life of an order?


Chart 1: Average Number of Algorithms, Brokers and Placements per Order by Order Size 


Chart 2: Percent of Total Orders by Order Size 

  • Understanding order workflow is a key aspect of analyzing an algorithm’s performance. An algorithm that’s given an order in the morning and is allowed to work all day will have a different outcome than an algo whose order instructions are corrected various times throughout the trading horizon. We were somewhat surprised to find that traders typically pick one algorithm, and one broker, to trade an order with over the day.
  • In the vast majority of cases, traders choose to use one algorithm and one broker to execute an order during the day. The average number of brokers with whom a trader places an order is just slightly over 1 for any order size.
  • Increased order size makes it slightly more likely for a trader to use more than one algorithm during the life of the order and also increases the average number of placements within that order.
  • The distribution of orders is skewed heavily toward very small orders and nearly 95% of all orders are under 5% MDV. Orders under 0.25% MDV made up the largest segment of the population, and on average, these orders were comprised of two placements with 1.1 algorithms.


Two full years of US algorithmic transactions were included in the analysis, from Q1 2014 through Q4 2015. A subset of clients, all of whom trade with multiple brokers, were included. Trades were grouped into order by trade date, side and security.


Refer to ITG Peer Analytics for information on available ITG Peer Group Database based analytics.

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