Changing Use Of Algos

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With Jacqueline Loh, Head of Asian Trading, Schroders
With the current amount of algo usage in the major markets in Asia, change in market microstructure is inevitable. That’s not necessarily a bad thing, it just means that users have to keep a very close eye on the workings on their algos and on how their algos affect markets. The float type algos have had most traction, although newer generation algos tend to be combination of algos e.g. Implementation shortfall and VWAP or float and VWAP.
Our policy is (and has always been) best execution and acting in the best interests of our clients. Our focus is on minimisation of impact costs rather than ratios. We look at execution services in terms of high touch and low touch, and the final choice of venue will be the one in which total impact costs, inclusive of commissions, are the lowest.
I actually think TCA provides the impetus for the next stage of algo development. As TCA reports provide more detail on the relative performance of algos, buy-side traders are in a position to objectively evaluate which ones work best for them. When a critical mass of buy-side traders do this and seek to enhance the algos they use, this will drive development on the sell-side.