TORA‘s Pascal Kuyten discusses how algo-wheels have evolved and aid the trading process.
Trading automation, and algo-wheels in particular, have seen wide adoption since their advent, but are not without controversy.
Algo-wheels, or rotating sets of brokers, selected based on a pre-defined set of execution requirements, first took the world of equities by storm around three years ago, promising better execution potential, a streamlined process and true broker neutrality.
In essence, algo-wheels are intended to be an automated, but still flexible, way to improve execution.
“In the [pre-automation] days, firms would do a transaction cost analysis and laminate sets of execution rules printed on A4 sheets – i.e. if these conditions apply, they would choose a certain algorithm. What an algowheel does is bring these sets of rules into an automated expression,” explains Pascal Kuyten, senior software engineer and quant analyst at trade tech specialist TORA.
“For us, an algo-wheel is simply a framework for automating a part of the workflow,” adds Kuyten. “Beyond that, it’s a way to provide actionable trade information in the right place at the right time.”
And hedge funds, by and large, have been experimenting with algo-wheels for several years. But over the past 12 months, a shift has occurred. Futures quants are getting in on the algo-wheel game – and developing their own.
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