Fidessa explores challenge of truly 'smart' order routing
New paper explains how SORs need to operate in an ever-changing marketplace
July 20th, 2015 - Fidessa group plc (LSE: FDSA) has today published a new paper entitled What you see is not what you get – the challenge of truly 'smart' order routing, authored by Will Winzor-Saile, Electronic Execution Product Specialist at Fidessa.
In his first paper of this series, Shifting Sands - the harsh realities of executing in today's markets, the issues around constructing a reliable, globally-consistent market access infrastructure were examined, along with how the more enlightened brokers were starting to rethink their approach to electronic execution. This new paper focuses on a fundamental part of this, the smart order router (SOR), and the challenges facing firms as they struggle to stay on top of the ever-changing market landscape.
Winzor-Saile comments: "In the equities space the multi-market landscape is well established. Before any order is sent to a market, the trader or algo looks at all available pools of liquidity before deciding on the optimum venue. This decision used to be simple and was based on which venue had the best price or the most volume. But as markets have evolved, firms can no longer rely solely on visible information to make these decisions."
The paper explores how the world of science, specifically quantum physics, can provide a valuable insight into this new trading landscape, intertwined with the drive for low latency and a broker's 'need for speed'. It also shines a light on how SORs interact with dark pools and the effects of hidden liquidity on achieving the best trading result.
"A new approach to SOR is needed that understands the reliability of the data and analyses market and microstructure trends", continues Winzor-Saile. "Firms that do this can add real value through their SOR and provide their clients with price improvements as well as more efficient alpha capture."PDF (0.06 MB)