 Arrival Price

a. To achieve the bid/ask midpoint price at the time the order is submitted, taking into
account the user-assigned level of risk aversion which defines the pace of the execution, and
the user-defined target percent of average daily volume.
b. User Inputs:
i. Max Percentage of Average Daily Volume
ii. Urgency Level
iii. Start Time/End Time
iv. Allow trading past end time checkbox
v. Attempt Completion by EOD checkbox
 Contingent VWAP
An order that is executed only if VWAP price is met along with the conditions specified.
Possible conditions may include the price of another security or the completion of another order.

 Crossing Aggregator
A situation in which a broker acts as agent on both sides of a given transaction. If the broker has
a buy order and an equivalent sell order, he/she can "cross" the orders. This is common in the
case of large orders, but is legal only if the broker first offers the securities to the public at a
price higher than the bid price.

 Crossing Algorithm Accessing Internal

Crossing by accessing internal dark pools

 Delta Hedge
Options – Limits will float with the underlying security according to the option delta. To keep
the delta relevant, the order will be temporarily suspended if it travels outside upper and lower
bounds of the underlier set by the user. This order will scan the market until the order is
marketable, then sweep liquidity accordingly.

 Discretion
An order which gives the broker the authority to determine when and at what price to execute the
transaction

 Index Arbitrage
A strategy designed to profit from temporary discrepancies between the prices of the stocks
comprising an index and the price of a futures contract on that index. By buying either the stocks
or the futures contract and selling the other, an investor can sometimes exploit market
inefficiency for a profit. Like all arbitrage opportunities, index arbitrage opportunities disappear
rapidly once the opportunity becomes well-known and many investors act on it.
 Gamma Hedge
A gamma hedge is a hedge that offsets a portfolio’s gamma with respect to a particular underlier.
It will generally comprise an options position in the underlier. It is only a partial hedge, since it
may leave the portfolio exposed to delta or vega with respect to that underlier

 Manage the Close

 Market on Close
A market order to be executed as near to the end of the exchange day as
possible. This is an order entered sometime during the day that grants
discretionary power to the trader, so that, as near as possible to the end of
the trading day, a market order will be executed.

 Pegging
Allows the customer to maintain a presence on the best bid (if buying) or offer (if selling) until
order is completed, cancelled, or reaches the end of trading session

 Portfolio Algorithm

 Percent of Volume
The participation algorithm is used to trade up to the order quantity using a rate of execution that
is in proportion to the actual volume trading in the market. It is ideal for trading large orders in
liquid instruments where controlling market impact is a priority. The percentage of the market
volume to trade. By default the participation percentage of the market volume to trade is 30%.

 Switching Algorithm

 Scaling
Scales rate of trading up/down based on user defined price movement thresholds and
participation rates.

 Small Order
The lack of liquidity after the 1987 market crash led NASDAQ to implement a mandatory
system (since June 1988) to provide automatic order execution for individual traders with orders
less than or equal to 10000 shares. (For stocks with low volume, it may be less than 200 shares).
Market makers must accept Small orders and so this provides excellent liquidity for smaller
investors and traders
 Spread (Pairs) Trading
Pairs trading is often conducted using algorithmic trading strategies on an
Execution Management System. These strategies are typically built around
models that define the spread based on historical data mining and analysis.
The algorithm monitors for deviations in price, automatically buying and
selling to capitalize on market inefficiencies. The advantage in terms of
reaction time allows traders to take advantage of tighter spreads.

 Target Volume
The TVOL determines completion time of the order and price based on market “ticks” or
volume. This strategy provides excellent support for a busy trading desk by effectively working
orders in line with market volume, and frees up the trading time to focus on the big picture.

 TWAP
The TWAP aims to evenly distribute an order over user–specified duration dynamically
balancing adverse selection and market impact in real time. Typically utilized for liquid tickers,
generating many small and frequent orders. The TWAP algorithm is used to trade a fixed
quantity order over a set period of time. The order is broken down into discrete time intervals
(waves) with an equal quantity to be traded in each wave.
Parameters:
i. Start Time
ii. End Time
iii. Waves
Example:
i. BUY 20,000
ii. Waves: 6
iii. Start Time: 10:00 End Time: 15:00

The TWAP algorithm will put 6 waves of 3,333 shares on the market at 10:00, 11:00,
12:00, 13:00, 14:00 and 15:00

 VWAP
a VWAP is useful where you don’t necessarily have a view on a stock and want to obtain a
fair price by sampling market levels over a period of time.
b. It is used to trade a fixed quantity order over a set period of time. The order is broken
down into discrete time intervals (waves) where the quantity to be traded in each wave is
proportional to the average historical market volume over the same time period. It is ideally
suited for individual orders or baskets which must be worked over several hours.
c. The objective of this strategy is to match or exceed the VWAP of the stock over a
specified time horizon.
d. Parameters
i. Start Time
ii. End Time
iii. Waves
e. Example
i. BUY 20,000
ii. Waves: 6
iii. Start Time: 10:00 End Time: 15:00
iv. The VWAP algorithm will put 6 waves at 10:00, 11:00, 12:00, 13:00, 14:00 and
15:00. The quantity of each wave will be proportional to the average historical market.
We have to save the historic data to get to the VWAP value.