Markus Gsell

Algorithmic Activity on Xetra

As successful algorithmic trading systems constitute a priceless value to their operators, their procedures of trading are kept secret and only little is known about their adaptation behavior to current market developments.Based on a unique dataset provided by Deutsche Börse AG the activity of computerized traders is analyzed.As the dataset provides high-precision timestamps a thorough analysis of submission, deletion and execution activities is enabled.Being able to distinguish algorithmic and non-algorithmic orders, empirical evidence on the different structures of algorithmic and non-algorithmic order flow is presented.

Order Handling of Institutional Investors

This study reflects the assessment of the largest European buyside companies concerning new order execution opportunities like Direct Market Access, Smart Order Routing or Algorithmic Trading. The focus of the survey is on self-directed trading based on these new technology driven execution opportunities (here defined as non-delegated order handling). This differs from the traditional way of order handling where execution responsibility is delegated to brokers. Altogether, the respondents largely support the concept of non-delegated order handling: They assess it to be compatible with their requirements concerning order sizes, anonymity as well as urgency. Also they perceive it to be flexible for variations in these demands. Finally, they believe this concept increases their trading control. As the main driver, the innovations’ fit for institutional trading tasks–determined mainly by the ability to provide trading control, anonymity and to satisfy varying urgency demands–was identified. Beside the fact that this fit directly affects the actual usage of non-delegated order handling, it also significantly affects performance expectations that prove to be the second strongest driver of the concept’s adoption. Further, it turns out that competition exhibits a rather weak effect. As an inhibitor for non-delegated order handling, contractual barriers could be identified. Contractual barriers are the financial attractiveness of broker contracts as well as valuable services concerning provided infrastructure and research that might be missed when deciding to use non-delegated order handling.

Facing new Regulatory Frameworks in Securities Trading

Technological changes in securities trading systems over the past decades not only changed the traditional business model in Europe and the U.S., but also put questions to the existing regulatory framework at both sides of the Atlantic. Heterogeneous customer demands for different vectors of services give rise to customised trading platforms. Regulation which forces trading venues into categories with fixed bundles of services is not in line with customer demands and limits innovation in securities trading landscape.