Smart Order Routing
More and more firms are turning to “smart order routing” algorithms to improve trading results and ensure that they are achieving best execution. With markets fragmented across a mix of visible and dark pools, and liquidity that is on the move, routing orders based on knowledge of and insight into current market conditions is critical. Traditional order routing based on static routing tables either puts someone else in control of the order, or risks routing decisions that don’t achieve best price.
But given the impact that routing decisions can have on results, an increasing number of firms aren’t content to put someone else in control of their routing decisions, and with the availability of new technology, implementing your own routing algorithms can become a practical option.
Aleri CEP technology lets you implement – and backtest – your routing algorithms quickly, by letting you focus on the algorithm rather than the coding. The starting point is a consolidated view of the market, provided by the Aleri Market Liquidity Analysis engine. That will tell you where the liquidity is and who has the best price – not just at top of book but at depth. From there you can customize the routing algorithms to include:
- Ability of quoted depth to absorb orders
- Apply execution costs, including rebates, to price quotes to consider ‘true’ price
- Estimate liquidity in dark pools based on execution patterns
- Estimate reserve liquidity based on refresh rates
- Apply customer preference and other factors into the routing decision
With out-of-the box integration for a variety of market data sources, plus full FIX connectivity, Aleri CEP is the ideal platform for implementing custom routing algorithms.
