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Algos, Odd Lots and Bursty Trading

Corporate bond traders are following the siren song of electronic trading, according to an in-depth article in the June 15, 2018 issue of the Financial Times. Authors Robin Wigglesworth and Joe Rennison have highlighted the shift in smaller, bursty trades made possible by the use of algo platforms that have been in use in equities for many years.

There are a lot of benefits to shifting to an algo platform. Wigglesworth and Rennison quote MarketAxess CEO Rick McVey:

“It’s a better platform for dealers and investors. Investors are getting a better price experience for small trades than ever before and dealers are getting in the middle of more trades at lower cost.”

Bond trades themselves are evolving from large blocks to odd lots — trades that are typically under $1M. Smaller trades make it easier to re-balance portfolios and serve new classes of investors.

By taking large trades and chopping them up into smaller transactions, bond traders can adopt the algo platforms already in use in other areas within their institutions. These platforms are able to handle bursty transactions and provide innovative traders with great advantages over their phone-based competition.

To be sure, even with the rise of odd lots, bond traders have little need for the screaming performance of ultra-low-latency equities platforms. Algo-driven systems do need to deliver consistent, predictable performance — and that’s why innovators and leaders should make sure that their platforms are up to snuff.

If your operation depends upon flawless execution, you have lots of implementation choices. Java-based platforms have lots of flexibility, can easily be modified to meet changing market conditions and strategies — and when stalls, timeouts or jitter start to surface there’s no better and more cost-effective strategy than a simple JVM upgrade to Zing.

If you plan to adopt an electronic trading strategy and you are using a Java (or JVM) -based platform, contact us and you’ll see why 8 out of 10 of the top institutions (plus lots of innovative, fast-growth firms) have chosen Zing for their algo trading systems.  

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