Electronic and Algorithmic Trading Technology

The Complete Guide


  • Kendall Kim, Kendall Kim consults as a Business Analyst and lives in Greenwich, CT. He has consulted and worked for firms such as UBS Investment Bank, Deutsche Bank, and Goldman Sachs.

Electronic and algorithmic trading has become part of a mainstream response to buy-side traders’ need to move large blocks of shares with minimum market impact in today’s complex institutional trading environment. This book illustrates an overview of key providers in the marketplace. With electronic trading platforms becoming increasingly sophisticated, more cost effective measures handling larger order flow is becoming a reality. The higher reliance on electronic trading has had profound implications for vendors and users of information and trading products. Broker dealers providing solutions through their products are facing changes in their business models such as: relationships with sellside customers, relationships with buyside customers, the importance of broker neutrality, the role of direct market access, and the relationship with prime brokers.Electronic and Algorithmic Trading Technology: The Complete Guide is the ultimate guide to managers, institutional investors, broker dealers, and software vendors to better understand innovative technologies that can cut transaction costs, eliminate human error, boost trading efficiency and supplement productivity. As economic and regulatory pressures are driving financial institutions to seek efficiency gains by improving the quality of software systems, firms are devoting increasing amounts of financial and human capital to maintaining their competitive edge. This book is written to aid the management and development of IT systems for financial institutions. Although the book focuses on the securities industry, its solution framework can be applied to satisfy complex automation requirements within very different sectors of financial services – from payments and cash management, to insurance and securities. Electronic and Algorithmic Trading: The Complete Guide is geared toward all levels of technology, investment management and the financial service professionals responsible for developing and implementing cutting-edge technology. It outlines a complete framework for successfully building a software system that provides the functionalities required by the business model. It is revolutionary as the first guide to cover everything from the technologies to how to evaluate tools to best practices for IT management.
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Primary audience: CEOs, CTOs, IT professionals, investment managers as well as traders in the financial industry who desire to understand the evolving landscape of trade technology. The objective of this book is to help readers gain a competitive advantage for best price execution, understand inhouse techonology solutions or software vendor products, and to inform readers regarding the effects of regulatory intervention.


Book information

  • Published: June 2007
  • ISBN: 978-0-12-372491-5


Advance Praise for Electronic and Algorithmic Trading Technology “Kendall Kim’s Electronic and Algorithmic Trading Technologyis well written, thoroughly researched, and logically organized. I look forward to using the book as a resource for class.” —Dr. Scott Gibson, Professor of Finance at the William & Mary Mason School of Business “In Electronic and Algorithmic Trading Technology, Kendall Kim provides valuable insight into the highly specialized world of computer trading. This includes key terminology and definitions, regulatory background, and industry drivers. In addition, the book provides an overview of the technologies and methodologies that comprise this complex industry. Electronic and Algorithmic Trading Technology is roadmap to the world of computer trading and is essential reading for both buy-and sell-side market participants.” —Sean Gilman, CTO, Currenex “Kendall Kim has managed to give a comprehensive overview of the mechanisms, the competitive landscape, and even some forecasts on the complex and quickly evolving topic of electronic and algorithmic trading technology. Deep domain knowledge is critical to success on Wall Street; understanding complex market forces at work only enhances the value one can bring to their trade. Anyone who wants to learn more about this rapidly evolving phenomenon can benefit by reading Kendall’s book.” —Jeff Hudson, CEO, Vhayu Technologies Corporation "Comprehensive and up-to-date. Useful for both practitioners and academics." —George S. Oldfield, Principal, The Brattle Group Washington, D.C. “Electronic and Algorithmic Trading Technology is an excellent resource for both academics and financial professionals outside the domain of electronic trading who are seeking a comprehensive review of an increasingly complex and ever-changing trading landscape. Kendall Kim has managed to provide an insightful, engaging, and eminently accessible summary of the core elements of algorithmic and electronic trading, the challenges faced by all trading businesses today, and what lies in store for the future of trading across a multitude of asset classes.” —Manny Santayana,Managing Director Advanced Execution Services – Equities, Credit Suisse "Kendall Kim’s work is a thorough snapshot of the world of automated trading, with an intricate history explaining why and how we got where we are today. Packed with examples and anecdotes, it makes an impressive reference guide to the multitudes of algorithms, systems and regulations in existence across the globe." —Matthew J Smalley, Director – ETD Execution Technology, UBS Investment Bank

Table of Contents

CHAPTER 1 Overview of Electronic and Algorithmic Trading CHAPTER 2 Automating Trade and Order FlowCHAPTER 3 The Growth of Program and Algorithmic TradingCHAPTER 4 Alternative Execution VenuesCHAPTER 5 Algorithmic StrategiesCHAPTER 6 Algorithmic Feasibility and LimitationsCHAPTER 7 Electronic Trading NetworksCHAPTER 8 Effective Data ManagementCHAPTER 9 Minimizing Execution CostsCHAPTER 10 Transaction Cost Research (TCR)CHAPTER 11 Electronic and Algorithmic Trading for Different Asset ClassesCHAPTER 12 Regulation NMS and other Regulatory ChallengesCHAPTER 13 Build vs. BuyCHAPTER 14 Trading Technology and Prime BrokerageCHAPTER 15 Profiling The Leading VendorsAppendixImplementation of Trading Systems