BestEx Research has launched a new functionality for execution algorithms for stocks and futures – named Order Aggregation – aimed at increasing efficiency when managing multiple orders.
Nigam Saraiya
Specifically, the tool addresses a major issue facing the buy-side, wherein higher slippage occurs when sending multiple parent orders for the same instrument when they arrive at different times.
The Order Aggregation feature sits within BestEx Research’s execution algorithms for equities and futures and allows traders to consolidate new orders with existing ones in real time, treating them as a single parent order.
Nigam Saraiya, chief product officer at BestEx Research, said: “An algorithm trading multiple orders for the same symbol can add to overall expected slippage. The more information an algorithm has – in this case, awareness and control of the total size being traded – the better it can decide on order placement and execution speed.”
Through this approach, high execution speeds are reduced, liquidity seeking is optimised, and trading costs are lowered.
The tool has been designed with the aim of fitting into existing workflows with minimal disruption, explained BestEx Research.
“Traders simply opt in, and fills are allocated on a pro-rata basis back to the original parent orders—no need for additional customisations within their OMS. While it’s not a silver bullet, it’s a significant step forward in making algorithms more intelligent and effective in handling the nuances of multi-order trading.”
Order Aggregation is particularly well-suited for trading desks that deal with large, complex orders, BestEx Research confirmed, wherein fair allocation without disrupting compliance workflows is key.
The new tool was developed in response to a request from Nordea Asset Management, a BestEx Research client, The TRADE understands – one of the first to put the new functionality into action.
Speaking to the impact of the offering, Eugene Seo, head of equity trading at Nordea AM, asserted: “It is necessary that multiple orders in the same security do not compete against each other but instead are aggregated and represented as a singular order in the market. Aggregating them helps us reduce signaling risk and ensures fair volume distribution across working orders.
“It ensures volumes are distributed on a pro-rata basis, so our investment teams are represented fairly […] Given our large average order size, our reliance is on conditional order types to achieve volume through larger and less predictable fills.”