One of the biggest challenges facing busy buy-side and sell-side trading desks is the ability to effectively manage large quantities of orders in real-time. Standard pre-trade processes involve ‘bucketing’ orders within the EMS and typically prioritizing by size (in terms of percentage of historic ADV or total notional value) or other variables like expected market risk and trade impact. Orders exposing higher values for these factors would be considered ‘high touch‘ orders, segregated and worked manually by the trader.
But what about the not-so-large trades or highly ‘liquid stocks,’ the type of flow that gets sent straight through the pipe into regular benchmarking algos? Should these orders be treated with any less importance than their larger counterparts just because of their rank in the trade hierarchy? A rhetorical question of course, and under the implementation of upcoming regulatory changes, trading desks need to demonstrate their ability to process and diligently execute their entire pad in accordance with best execution policies. This requires sophisticated monitoring, and it’s where technology steps in.
At OTAS, we understand that traders with consistently large order pads cannot realistically manually manage all their flow every day. The key is the ability to identify the trades where they can add real value, rather than focus where they cannot.
Intraday Screener solves this problem by helping traders optimise their order pad in real time. ‘Outlier’ orders are identified using the stock behaviour that the trader deems most important to their trading style; such as extreme price movements, capturing irregular traded volumes and liquidity, or monitoring price spreads. Importantly, the analysis is systematically applied across the whole order pad, meaning once the trader has applied specific scenario analysis, he/she can manage the exceptions from the smallest low touch ticket to the largest multi-day ticket on the pad.
To simplify the optimization of order pads, Intraday Screener provides ‘hot buttons‘ at the top of the application, which combine multiple stock characteristics and allow traders to change views to monitor specific trading conditions to support decision making and strategy.
‘Basic‘ compares the intra-day price return (+/-) and traded volume. Stocks in the top right quadrant, for example, exhibit positive idiosyncratic price performance on higher than expected volume, which may make them easier to trade, but subject to mean reversion. A trader may want to take a closer look at an order in this security. The Basic combination of factors help traders manage orders that are reacting to new information in the market, such as trending with volume, or that are being affected by the heavy footprint of others and may mean revert when those orders finish.
‘Volatility Risk‘ compares the liquidity of orders on the pad with the spread between best bids and offers. Traders use this analysis to identify high impact or potentially hard to trade orders. Conversely, a stock with exceptional liquidity and low spread should be easier to trade.
**Ashtead Group experiencing poor trading conditions with below average liquidity and exceptionally wide spread.
‘HFT Signals’ compares the volume and liquidity fractions, which we define as fifteen-minute moving averages of the relative strength of buyers and sellers, in terms of posted liquidity and traded volume. A stock in the top left-hand quadrant, for example, has seen more shares traded on the bid (sellers crossing the spread) but is displaying more posted bid liquidity than offer. As with all intraday exceptions, the potential for mean reversion in this stock should be front and centre of a trader’s mind (because the HFTs are thinking the same thing).
‘Custom’, as the name suggests, allows the trader to determine the factors that show on the chart axes and determine the size and colour of the bubbles.
Intraday Screener is a powerful trade-monitoring tool shaped to the factors that matter most to you and your trading strategy. In an ever-increasingly automated market, Intraday Screener ensures that you never miss an anomaly on your order pad, freeing you up to trade more efficiently.