Quantitative Brokers is keeping the algorithmic wheels turning as it has partnered with Rebar Systems to provide fixed-income and futures algos.
In this partnership, Rebar clients will have access to QB’s multiple algorithms via the former’s Rebar Order Management and execution platform. ROME, formally launched in April 2018, has integrated QB’s fixed-income and futures algorithms - Bolt, Strobe, and Closer - to offer hedge funds and asset managers streamlined trading workflows and a greater ability to achieve and measure best execution.
Ralf Roth, QB
Ralf Roth, Chief Executive Officer at QB, explained to Traders Magazine that expanding algorithmic trading into the fixed-income and futures markets is a natural evolution for the both firms as they look to court more buy-side business in these growing asset classes.
QB offers three algos targeting fixed-income and futures: Bolt, Strobe and Closer.
Bolt is the firm’s flagship algorithm. It operates in passive fashion by posting into the order book and holds onto the bid or offer and waits for liquidity to come its way. As Roth explained, Bolt reacts to certain market signals, such as an order imbalance, and then springs into action.
“Bolt isn’t just crossing the spread to get something done,” he said. “Using this algorithmic strategy requires time and patience – thus you might see a low participation rate for periods of time. This is a much better way to trade as it reduces slippage against the benchmark.”
He added that Bolt is an implementation shortfall type algo.
Then there is Strobe. Strobe is a schedule-based type of software – it can operate as a VWAP or TWAP algorithm similar to what you know from equity markets. Strobe needs to execute a certain amount of volume during a specific time period.
And then there is Closer. As Roth explained, Closer is used by traders who use a closing price as their benchmark.
“Funds that use end of day NAV (net asset value) as their benchmark use Closer,” he said. “These types of traders are looking to execute as much quantity as possible in the last few minutes before the close.
In an exclusive to Traders Magazine, Roth also said there is a fourth algorithmic strategy that is in the works to be certified through Rebar for fixed-income and futures soon – Legger. Legger is a strategy that can trade multiple legs or securities at the same time, thus helping traders manage the risks inherent in multi-security or leg trading.
“Take for example, somebody trying to trade US Treasury 10 year against the 5 year contract; one long and one short leg,” he began. “Legger can manage trading in different instruments and on multiple different exchanges, slowly trading those and trying to stay risk neutral.”
Also, Legger can be used in a variety of trades – such a swap, a roll or even butterfly stips. For the fixed income professional, these spread trades are usually done manually. Via algorithm, these more involved trades where a buy and sell of multiple securities within a venue are executed more efficiently. Roth added that use of Legger can also enable multi-venue trading of these complex trades.
“Legger can help execute across multiple exchanges, which is actually not that easy to do,” Roth explained. “It requires quite a bit of sophistication to manage the legging risk.”
These algorithmic strategies are available and operate in the U.S., Europe and Canada. Roth said the strategies will soon be available in Australia and Japan.
