The Publishers League

On of the big growth areas for many brokers who offer algorithmic trading services to their customers these days is in algorithm customization.

The Buy-side is generally a lot more sophisticated than it used to be, so the Sell-side has to cater to that. Accordingly, brokers are now helping clients to customize their strategies and fine-tune the algorithms so that they work exactly how their clients want them to work.

Many brokers offer “canned strategies” as standard and then tweak them to suit the needs of individual clients. Some even allow the clients to tweak or tune the strategies themselves.

Of course there is a difference between tuning an algo trading strategy that is already available and building a new one from scratch. But even a “canned” algorithmic trading strategy generally has a number of parameters that can be adjusted by the client from their own desktop.

In this way, algorithmic trading is evolving, particularly with the introduction of FIX ATDL (Algorithmic Trading Definition Language). This technology allows changes to be made to an algorithm, by a client, at parameter level.

This is how some brokers are now differentiating themselves in what is becoming an increasingly crowded market. The brokers who are ahead of the game are those who are able to offer this kind of framework, for customised algorithms, to their clients. The ones who are struggling to keep up are the brokers who are unable to offer this service.

As recently as five years ago, most brokers were only able to offer customized algorithms as “one-offs”, which was expensive from the client perspective. But since the introduction of FIX ATDL, there is now a standard framework in place for delivering algorithms to a client and giving them the flexibility to tweak and fine-tune those algorithms. FIX ATDL provides a solid foundation for rapidly deploying and delivering custom algorithms.

This is a key differentiator for the brokers who have adopted this standard. They can deliver custom algorithms more quickly and more flexibly to their clients, at a much lower cost.

For more information about this topic, listen to the Algorithmic Trading Podcast

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