Saturday, February 24, 2007

Algo customization for India

The Asia-Pacific region and India might be considered to be coming up on the algorithmic rails, with more than three quarters of orders currently routed via FIX in Asia. But the decentralised nature of markets in Asia will mean that it will be harder for brokers and vendors to develop differentiated technologies in each market. India, with its multiple connectivity challenged exchanges, will lag the trailblazers

While customised algorithms specifically for the Asian markets work as well as anywhere else around the world, it is difficult to simply import algorithms from other parts of the globe and expect them to work across Asia. They do need calibration to market conditions.

In terms of algorithmic providers in the region, Credit Suisse accounts for a 63 per cent market share according to TABB Group, followed by Goldman Sachs (13 per cent).

Richard Balarkas, managing director, head of Advanced Execution Services Sales at Credit Suisse, says that with each specific market in Asia the algorithms have to be carefully calibrated. He says: “Some of the Asian markets can be trickier than many other markets. There are a lot of idiosyncrasies out there in terms of tick rules, trading hours and the way they handle orders.

“That is another way in which algorithms can help. If you are selling from somewhere in Europe, then trying to trade [equities in] Asia can be extremely complicated and difficult to understand.”

While Algo trades are sweeping the stock markets, there are also some lurking dangers of its widespread use.

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