Can someone please just summarize when it’s better to use a VWAP algorithmic strategy and when it’s better to use an IS algorithmic strategy for a given trade? In terms of whether the volume is a large part of the days volume, urgency etc…
Neither are good for large % of daily trading, IS is good for urgent trades, VWAP for less urgent. Someone can clarify this, but I don’t think either are good when bid/ask spreads are wide.
Vwap if low urgency, implementation shortfall if high urgency. Both Overridden by a broker / ECN order if big trade relative to volume (25%+ dtv)
how to find the 25% in the book. I think 20% is big ralative , could you provide some clue in the book?
Was just an example. I think they wouldn’t put 12% for the reasons you state (ie no book guidance) there’ll be one that’s 20-25%+ - just use broker / ECN for that one (if they ask - broker if high urgency as has more assurity of completion)
What about wide bid ask, would you use ECN or Broker? Broker will pay Bid/Ask or use principal trade to possibly lower spread, ECN won’t pay spread and trade at midpoint? What is your opinion? I think high bid/ask you look at ECN first.
12% is small I remember I did a question like this but 30% is large I personally think 15% -20% is ambiguous area good luck
bid ask I think it is about your confidence and strategy if you think the information is valuable and urgent to cover high costs, you should choose a broker for more important is immediacy execution if you can wait for a long time , choose electronic networks
I would also use ECN first on wide bid ask and hope it gets filled - unless ultra urgent (obv)
Iceberg order - information cost is high, urgency low. Is that even possible? Sounds like it would be the appropriate type of trade.
ok also add IS works best if the trading volume for the security happens towards close of business… IS need an evenly traded volume… - I am not sure what is required for VWAP
v.raghavan Wrote: ------------------------------------------------------- > ok also add IS works best if the trading volume > for the security happens towards close of > business… > > IS need an evenly traded volume… - I am not sure > what is required for VWAP Nope. Vwap works best in nontrending markets, IS better in trending markets (as it accounts for Market impact / movements) - vwap can be gamed in trending. But those are more conditions of when the measure is more appropriate for ex ante trade valuation. Urgency is the most important thing for determining the algorithmic trading strategy.
Paraguay Wrote: ------------------------------------------------------- > What about wide bid ask, would you use ECN or > Broker? > > Broker will pay Bid/Ask or use principal trade to > possibly lower spread, ECN won’t pay spread and > trade at midpoint? > > What is your opinion? > > I think high bid/ask you look at ECN first. If it was low urgency with wide bid/ask spread I would definitely pick ECN. High urgency I’d probably choose either IS or brokered, depending on the volume. High bid/ask spread is indicative to an infrequently traded asset, so chances are you may be doing a large % of daily trading. High urgency/low volume, I suppose I’d still pick IS and just take the hit on the spread (as you said, you’d take it with a brokered trade as well, either directly or through more of a price concession)
IF EVERYTHING IS LOW, USE VWAP LOW URGENGY LOW BID/ASK LOW VOLUME = VWAP IF EVERYTHING IS HIGH, USE CROSSING IF IN BETWEEN, USE IMPENT SHORTFAL
If everything is high you want to use a broker not crossing. Crossing has no assurity of completion. High priority trade definitely uses Broker.
wrong every thing high use broker
Definitely disagree- crossing networks are poor for high urgency, as they do not have execution certainty.
Hehe.
crossing is not ECN, is it? I don’t have working experience here. I thought ECN is electronic communication network, not electronic crossing network. So what should I use if spread is high? crossing? or ECN?
IS - High Urgency VWAP - Low Urgency, Low Spreads, Low Trade Size Broker - Low Urgency, High Spreads, High Trade Size Crossing - Low Urgency, Low Spreads, High Trade Size