Broker wheel of fortune

Broker wheel of fortune

The algo wheel has burst onto the scene promising to help the buy-side assess, monitor and justify algorithm and broker choices to regulators. The TRADE investigates how the tool works and asks what all of the fuss is about. FlexTrade’s Rich McGraw, senior vice president, global multi-asset EMS/OMS sales, provided some comments.


The algo wheel has burst onto the scene promising to help the buy-side assess, monitor and justify algorithm and broker choices to regulators. The TRADE investigates how the tool works and asks what all of the fuss is about.  FlexTrade’s Rich McGraw, senior vice president, global multi-asset EMS/OMS sales, provided some comments.

From the article:

“Too many algo choices is a problem if a firm cannot efficiently navigate through them,” says Rich McGraw, senior vice president, global multi-asset EMS/OMS sales, FlexTrade. “If a buy-side firm has hundreds of algos and no way to consistently decipher which ones work well for specific order types, best execution could be at risk.

“Without taking systematic steps, ranking brokers with difficult orders against brokers with easy orders will produce too much inaccurate analyses – or noise.”

“We like to use the term data-driven trading, which includes both performance-driven trading plus dynamic analyses. Historical transaction cost analysis (TCA) is at the root of both since it can reveal how broker algos performed versus orders with any characteristics,” he adds.

Firms can create trading scenarios such as “VWAP on small-cap names with 20% ADV”, or “Implementation Shortfall on mid-cap names with 10% ADV” or any other conditions. Then TCA can rank how all broker algos performed under similar scenarios,” he explains. 

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FlexTrade is a global leader in broker-neutral, execution and order management trading systems for equities, FX, options, futures and fixed income. A pioneer in the field, FlexTrade introduced the first trading system that allowed clients to control and customize their proprietary algorithms while maintaining the confidentiality of their trading strategies. Change is the only constant in electronic trading. That's why FlexTrade is continuously upgrading its products and services. All can be tailored to meet the demanding requirements of a global client base of more than a 225 buy- and sell-side firms.
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