Elsevier S & T

Electronic and Algorithmic Trading Technology: The Complete Guide

Kim, Kendall

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Table of contents
  • Cover
  • Electronic and Algorithmic Trading Technologyiii
  • Copyright Pageiv
  • Contentsvii
  • About the Authorxiii
  • Series Prefacexv
  • Introductionxix
  • Chapter 1: Overview of Electronic and Algorithmic Trading1
  • 1.1. Overview1
  • 1.2. The Emergence of Electronic Trading Networks2
  • 1.3. The Participants4
  • 1.4. The Impact of Decimalization6
  • 1.5. The Different Faces of Electronic Trading8
  • 1.6. Program Trading and the Stock Market Crash of 198710
  • 1.7. Conclusion13
  • Chapter 2: Automating Trade and Order Flow15
  • 2.1. Introduction15
  • 2.2. Internal Controls16
  • 2.3. Trade Cycle17
  • 2.4. Straight-Through Processing and Trade Automation19
  • 2.5. Data Management20
  • 2.6. Order Management Systems22
  • 2.7. Order Routing25
  • 2.8. Liquidity Shift26
  • 2.9. Conclusion28
  • Chapter 3: The Growth of Program and Algorithmic Trading29
  • 3.1. Introduction29
  • 3.2. A Sample Program Trade31
  • 3.3. The Downside of Program Trading33
  • 3.4. Market Growth and IT Spending36
  • 3.5. Conclusion38
  • Chapter 4: Alternative Execution Venues39
  • 4.1. Introduction39
  • 4.2. Structure of Exchanges40
  • 4.3. Rule 39043
  • 4.4. Exchanges Scramble to Consolidate44
  • 4.5. Arguments Against Exchanges44
  • 4.6. The Exchanges in the News46
  • 4.7. Conclusion49
  • Chapter 5: Algorithmic Strategies51
  • 5.1. Introduction51
  • 5.2. Algorithmic Penetration52
  • 5.3. Implementation Shortfall Measurement54
  • 5.4. Volume-Weighted Average Price56
  • 5.5. VWAP Definitions58
  • 5.6. Time-Weighted Average Price60
  • 5.7. Conclusion62
  • Chapter 6: Algorithmic Feasibility and Limitations63
  • 6.1. Introduction63
  • 6.2. Trade Structure64
  • 6.3. Algorithmic Feasibility64
  • 6.4. Algorithmic Trading Checklist66
  • 6.5. High Opportunity Costs66
  • 6.6. Newsflow Algorithms68
  • 6.7. Black Box Trading for Fixed-Income Instruments69
  • 6.8. Conclusion70
  • Chapter 7: Electronic Trading Networks71
  • 7.1. Introduction71
  • 7.2. Direct Market Access71
  • 7.3. Electronic Communication Networks75
  • 7.4. Shifting Trends79
  • 7.5. Conclusion80
  • Chapter 8: Effective Data Management83
  • 8.1. Introduction83
  • 8.2. Real-Time Data84
  • 8.3. Strategy Enablers85
  • 8.4. Order Routing87
  • 8.5. Impact on Operations and Technology88
  • 8.6. Conclusion89
  • Chapter 9: Minimizing Execution Costs91
  • 9.1. Introduction91
  • 9.2. Components of Trading Costs92
  • 9.3. Price Impacts with Liquidity93
  • 9.4. Cost of Waiting97
  • 9.5. Explicit Costs„Commissions, Fees, and Taxes98
  • 9.6. Conclusion100
  • Chapter 10: Transaction Cost Research103
  • 10.1. Introduction103
  • 10.2. Post-Trade TCR105
  • 10.3. Pre-Trade TCR106
  • 10.4. The Future of Transaction Cost Research108
  • 10.5. Conclusion109
  • Chapter 11: Electronic and Algorithmic Trading for Different Asset Classes111
  • 11.1. Introduction111
  • 11.2. Development of Electronic Trading113
  • 11.3. Electronic Trading Platforms116
  • 11.4. Types of Systems119
  • 11.5. TRACE„Reform in Transparency120
  • 11.6. Foreign Exchange Markets122
  • 11.7. The FX Market Ecosystem123
  • 11.8. Conclusion124
  • Chapter 12: Regulation NMS and Other Regulatory Reporting125
  • 12.1. Introduction125
  • 12.2. Regulatory Challenges126
  • 12.3. The National Market System127
  • 12.4. The Impact of Regulatory NMS131
  • 12.5. Markets in Financial Instruments Directive in Europe133
  • 12.6. Regulatory and Exchange Reporting135
  • 12.7. Example of an Exchange Data Processing System138
  • 12.8. Conclusion139
  • Chapter 13: Build vs. Buy141
  • 13.1. Introduction141
  • 13.2. Vendor as a Service Provider143
  • 13.3. Striving to Stand Out147
  • 13.4. The Surge of Electronic Trading Through Regulatory Changes149
  • 13.5. Hedge Fund Systems„Outsource or In-House?149
  • 13.6. Conclusion152
  • Chapter 14: Trading Technology and Prime Brokerage153
  • 14.1. Introduction153
  • 14.2. Prime Broker Services154
  • 14.3. The Structure of Hedge Funds157
  • 14.4. The Impact of Increased Trading Automation158
  • 14.5. Different Markets and Asset Classes159
  • 14.6. The Prime Brokerage Market160
  • 14.7. Conclusion161
  • Chapter 15: Profiling the Leading Vendors163
  • 15.1. Introduction163
  • 15.2. Profiling Leading Vendors166
  • 15.3. Order Management Systems175
  • Appendix: The Implementation of Trading Systems181
  • A.1. Overview181
  • A.2. Project Phases182
  • A.2. User Acceptance Testing183
  • A.3. From Implementation to Customization184
  • A.4. The Challenges of Data Integration184
  • A.5. Supporting Financial Products184
  • Glossary of Terms187
  • Index199
Book details
  • Vendor Elsevier S & T
  • SKU 9780123724915
  • ISBN-13 9780080548869
  • Author Kim, Kendall
  • Category Business & Economics
  • Subject Finance

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Electronic and algorithmic trading has become part of a mainstream response to buy-side traders’ need to move large blocks of shares with minimum market impact in today’s complex institutional trading environment. This book illustrates an overview of key providers in the marketplace. With electronic trading platforms becoming increasingly sophisticated, more cost effective measures handling larger order flow is becoming a reality. The higher reliance on electronic trading has had profound implications for vendors and users of information and trading products. Broker dealers providing solutions through their products are facing changes in their business models such as: relationships with sellside customers, relationships with buyside customers, the importance of broker neutrality, the role of direct market access, and the relationship with prime brokers.
Electronic and Algorithmic Trading Technology: The Complete Guide is the ultimate guide to managers, institutional investors, broker dealers, and software vendors to better understand innovative technologies that can cut transaction costs, eliminate human error, boost trading efficiency and supplement productivity. As economic and regulatory pressures are driving financial institutions to seek efficiency gains by improving the quality of software systems, firms are devoting increasing amounts of financial and human capital to maintaining their competitive edge. This book is written to aid the management and development of IT systems for financial institutions. Although the book focuses on the securities industry, its solution framework can be applied to satisfy complex automation requirements within very different sectors of financial services – from payments and cash management, to insurance and securities.
Electronic and Algorithmic Trading: The Complete Guide is geared toward all levels of technology, investment management and the financial service professionals responsible for developing and implementing cutting-edge technology. It outlines a complete framework for successfully building a software system that provides the functionalities required by the business model. It is revolutionary as the first guide to cover everything from the technologies to how to evaluate tools to best practices for IT management.

*First book to address the hot topic of how systems can be designed to maximize the benefits of program and algorithmic trading
*Outlines a complete framework for developing a software system that meets the needs of the firm's business model
* Provides a robust system for making the build vs. buy decision based on business requirements