Source material is [here].
1. Introduction
1.1 Overview
- In the 1990s 50% of the flow was manual, on the trading floor with the other 50% being electronic
- In the 2000s algorithmic trading got started
1.2 What is an Algorithm?
How to categorize algorithms
Single-order vs. List-based
- For list-based algos all orders are considered “jointly”
- You may still submit a list of orders to a single-order algorithm
- single-order algorithms trade the orders simultaneously but independently
Order Over Time vs. Discrete Point in Time
- The latter is called a “smart router”
- Primary function is to route an order to a venue. Still uses an algo
- Orders that are split over time is generally what is considered “algorithmic” trading
- Algorithms are usually measured against some benchmark
Categorizing Algos on approach to Working Orders over Time
Scheduled-Based:
- TWAP (Time-weighted Average Price)
- VWAP (Volume-weighted Average Price)