Getting the Right Fit : Buy-side, Sell-side and Vendor on Non-Standard ATDL Implementation

Dmitry Koltunov of Highbridge Capital Management opens up to FIXGlobal about the buy-side expectations for FIXatdlSM algos and how vendors and sell-side firms can improve their offerings.

How do you evaluate a broker’s FIXatdlSM offerings? Are you requiring or looking for them to hold to a standard?

Our preference is towards FIXatdlSM 1.1 or 1.0, since the recent iterations are able to capture more details of the algorithm. However working with any version of FIXatdlSM is already a significant improvement over a static document. Since our proprietary EMS/OMS is built around a customized implementation of FIXatdlSM, the broker FIXatdlSM can never be taken “as-is”. We also do some minimum tweaking to the layout, rules and default settings based on our trader’s preferences. This allows us to have the same look and feel for similar algos from multiple providers.

The standard has been evolving significantly, and in our view, it would be beneficial for the industry to come to more of a convergence point. Having every FIXatdlSM consumer require a different version may be detrimental to overall adoption, because it raises the maintenance cost for the vendors to keep backwards compatibility for each client. The FPL Algorithmic Trading Working Group (which developed FIXatdlSM) has now drawn a line in the sand with the latest version and is making a widespread industry push for it. FIXatdlSM 1.1 is quite comprehensive, so we would be pleased to see the community shift gears from evolving content to aiding adoption of this version. However there are constantly new types of Algorithms coming to the market and this will keep pushing the standard to grow and change. The challenge remains for the industry to work collaboratively to evolve at a measured pace while fostering widespread adoption.

How responsive are your brokers to your requests for new algorithmic products?

We have seen varied response times, which range from a few weeks to over a year, depending on the broker, algo type and level of customization. Most bulge bracket firms are responsive, but the smaller boutiques can vary from poor to great, with those that explicitly focus on execution at the forefront. Some brokers have also put together custom solutions for our traders, and those timelines vary from weeks to months.

It has been a challenge to integrate with brokers that tie their algos to a particular EMS. In one particular situation, a vendor indicated that it would take over a year to make its algo accessible through FIX. Waiting was not an option, so we ultimately worked with another vendor with similar functionality that did not require a particular EMS and could integrate through FIX and FIXatdlSM. Vendors that realize that their real product is execution logic, as opposed to a particular display or EMS, wind up being more successful. In general, we have recently seen more brokers respond to us with FIXatdlSM. This is a positive development, because a year ago, only a handful of brokers were even aware of it. In many cases, we were the first firm to ask our brokers for FIXatdlSM files, so we find it encouraging that more than half are now able to serve up the files. When we do request FIXatdlSM, the timelines vary from weeks to months, and we have seen some firms hire consultants to complete it more quickly.

Timing is a differentiator and FIXatdlSM is critical to this. In general, traders become accustomed to how certain algos behave, and the first algos to get ’test-driven’ have an advantage. As the space becomes increasingly crowded, I can see the laggards start to struggle to keep a presence.

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