Algo Performance by Market Regime

Our latest research article is a further extension to our previous work on measuring and predicting liquidity and volatility regimes.

In this paper we investigate a practical application of the regime framework by analysing the performance of different algo styles within different regimes. As one would intuitively expect, choosing the right algo, or even style of algo, for the prevailing market conditions is an important decision component in the overall best execution process. We find that the performance difference across different regimes can be significant, for example, for the Get Done style, slippage vs arrival price can fluctuate by 2.5bps on average across different volatility regimes. We believe that trying to adopt a more rigorous approach to algo selection, that is both data driven but combined with trader intuition, represents a positive step forward.

If you are a client of BestX and would like a copy of the paper, please email support@bestx.co.uk.