THERE ARE NO ELECTIONS on Wall Street, but it can be said that market participants vote with their feet, and wallets, every day when they choose who to do business with.
In that regard, Deutsche Bank was voted into office by the buy-side, equity-trading electorate in 2013.
“We’ve seen a tremendous uptick in the usage of our products in spite of a declining volume environment,” said Jose Marques, global head of electronic equity trading at Deutsche Bank in New York. “We’ve essentially doubled market share for our institutional algo offering — Autobahn — in the past year, which can only be attributed to the very high-quality performance of the product and the coverage team.”
“Over the last 12 months, we have aggressively expanded into nearby asset classes, especially options, where we now have a very sophisticated market-leading product – Autobahn Options,” Marques told Markets Media. “We have also worked on the continued evolution of our equity platform in 2013, with a quantitative approach to creating algos, monitoring their performance, and improving them over time.”
Multi-asset trading and investing is a significant market trend. Another in-demand service is seamless and efficient connectivity to exchanges and alternative trading systems, especially as trading venues have proliferated in recent years.
Another recent focus area for Deutsche Bank has been its market-access products, which are driven by what Marques termed an “extremely low-latency” field programmable gate array (FPGA) platform. The platform has access to every U.S. exchange and nearly every protocol they offer, and provides market-access times of about 1 microsecond.
Striving for excellence is an ongoing project that can’t be encapsulated in one calendar year, and as such Deutsche Bank’s initiatives have carried over. “We’re off to a tremendous start this year, even before the volatility of the past week,” Marques said on Jan. 31. “We have built a lot of smart functionality into the algos on Autobahn. A big focus for this year is about helping our clients get even more out of the product, by educating them about what the product can do. We can really offer so much more than your old-fashioned (volume-weighted average price) algo, especially with our more opportunistic offerings, including Stealth.”
Marques said a 2014 DB endeavor is to improve its trade-performance measurement, while striking the right balance between man and machine in its algorithmic suite.
“One of the areas we plan to focus on this year is on developing truly intelligent alerting and real-time, intra-trade analytics,” Marques said. “TCA is great — at the end of the day, month or quarter, you can look back and glean some ideas about how you can improve your strategies. But the real win is to have a human buy-side trader step in at the appropriate time to interact with the algo and have the ability to add some value.”
Marques likened an algorithm to a junior employee, in that they can both accomplish a lot on their own, but their performance is optimized with periodic collaboration including check-ins and status updates.
“During the electronic trading process, a buy-side trader outsources some of his work to the algo. If you have an assistant you give work to, you expect that assistant to sometimes come back and say I’ve done what I could, but now I need some input or some help. We want algos to function in the same way and be a real leverage tool,” Marques explained. “The buy-side trader gives the algo a lot of work, as much as you possibly can, but then you expect the algo to alert you when something important is happening in the trading process.”