InfoWARE introduces Algorithmic Trading System into Nigerian Market

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CEO InsightNewsletterPress Releases
July 6, 2014
 

InfoWARE introduces Algorithmic Trading System into Nigerian market

Picture This: “ Mr. Ade Oghene is the Head of Equity trading at one of  the most prestigious Stock Broking firms in Nigeria. Their clientele range from Institutional clients to Hedge fund managers who transact businesses worth billions of Naira. He waltzed into his trading room recently only to see the Chief Dealing Officer leaning back in his chair reading Trader magazine, cross-legged while sipping coffee. It was the middle of the trading day ”. “ Trading void? Do you need something to do?” “ I’ve got the algos working. I could go high-frequency, if you want.” “ No, that’s OK. Keep up the good work.”

Smartass trader. I suppose I had that one  coming, though.

The trading landscape certainly has changed over the past 5 years. The Nigerian Stock Exchange with broker-dealers, buy-side funds, exchanges and venues of trade execution as its primary players, is experiencing a historical transformation. This enormous change is being driven by deep underlying factors shaping global market today including:  
  • Competitive pressures on broker-dealers to offer electronic services and best order execution to their clients.
  • The consolidation of execution venues
  • Increased regulatory requirement from financial authorities to improve transparency for all market participants.
  Institutional clients need to trade large amounts of stocks. These amounts are often larger than what the market can absorb without impacting the price. The buy-side is increasingly searching for solutions to lower transaction cost and enhance quality of their executions which are being more closely monitored and scrutinized. On the sell side, large firms are looking to outsource their trading desk to increase their capacity to execute more volume. Major brokerage houses are franchising their computer trading strategies to smaller firms while small and mid-size broker dealers are not adequately equipped with resources to handle this volume. Thus, the need for Algorithmic trading Algorithmic trading or Black Box trading offers a less expensive option to full service brokers, while providing a way to complete a complex order type. Algorithmic trading refers to any form of automated rule-based trading where decision-making is delegated to a computer model.
   

The key development is the increasing use by the sell side of algorithms to execute their business as an alternative to the traditional route. Typically this type of algorithm is designed to target a trading benchmark: for instance VWAP(Volume Weighted Average Price), implementation shortfall or market-on-close.

 

In its simplest definition, Algo trading is the ideal strategy for successful traders/professionals who needs to invest or trade, and do so successfully. Some of the benefits of Algorithm Trading as shown from industry studies:

 
  • Sterling success track record: It is used by nearly 15,000 people in over 3 dozen countries globally in several foreign markets including Canada, USA, London, Hong Kong, India, Australia and Singapore.
    • Decreased Cost: Commissions for electronic trading tend to be significantly lower than trades worked manually but increased volume mean increased profit for brokerages
 

    • Control of Information Leakage: It precludes traders from having to expose their alpha expectations to anyone outside the office.

 

  • Back-tests can be performed. In other words, one can simulate the algorithm as it would have performed on data in the past. This makes it possible to develop strategies that would have performed well in the past, and then one can hope that they will continue to perform well in the future. This is simply not possible with discretionary trading

 
  • Speed is good.  Computers can perform computations and place orders extremely quickly. A trading algorithm running on a decent computer can react to changing situations in milliseconds, while human traders cannot even move their fingers to the keys that quickly, let alone make a decision in that time.

  • Algorithms have no emotions. Novice traders lose a lot of money because of their emotions. One classic response is to panic and sell something when the price drops rapidly. Sometimes this is the right thing to do and sometimes it’s the wrong thing to do. But fear alone should never be a reason to sell. An algorithm will never make this decision because of fear.

 

Algorithm trading will enable “Both” sides to focus on execution. For the buy side, execution cost will become transparent. For the sell side, the profitability of both their overall trading departments and of individual accounts will be measurable. The sell side will respond to this by reallocating resources towards profitable activities and relationships. If you have made it thus far, InfoWARE Algo Trader is around the corner!

Our Differentiating Factor:

  • It provides a range of strategies that you can chose from
  • No programming required
  • 100% automated execution after selecting your strategy
  • Easy to Use
  • Increase your trading capability while keeping risk at minimum
  InfoWARE Algo Trader uses superior technology and flexible back office operations to provide a wide range of services designed to meet your specific trading needs. We are constantly evolving and expanding our technology and services to meet the unique algo trading needs of our clients while providing unmatched technology support.
 
For more information
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