Hong Kong – 24 August 2010: A study analyzing algorithm performance in Asia during the first half of 2010 found wide variations in performance across markets, with Hong Kong and Singapore faring weaker than Japan.
The Transaction Performance Analysis compiled by Tora, Asia’s leading provider of advanced trading technology and financial services, reviewed approximately 120,000 algorithm orders from the first six months of 2010 and found slippage for VWAP algorithms varied across markets and brokers. Average slippage was 15.1 basis points (bps) in Singapore, 9.5 bps in Hong Kong and 4.5 bps in Japan. In percentage terms, slippage was 111% higher for Hong Kong than Japan, and 236% higher in Singapore than Japan. The study showed performance varied by as much as 8.0 bps across brokers in Asia and that algorithms, despite variations in performance, can offer cost savings compared to a traditional execution.
“Algorithms are an important tool increasingly used by traders in Asia, yet the study results clearly show there are differences in performance,” said Robert Dykes, Tora’s Chief Executive. “The overall advantages are clear as long as traders are diligent about which brokers’ algo they use given their trading objectives.”
Slippage is the difference between the intended price of a trade and the price where the trade is actually executed. The study focused on VWAP as this benchmark remains the predominant trading objective used in Asia.
Dykes notes that the difference between the three markets can partly be attributed to the concentration of liquidity in those markets in individual names (equities). Another factor is volatility which is substantially higher in Hong Kong and Singapore when compared to Japan.
“Our analysis looked at a wide range of factors that affect performance including liquidity, volatility, spreads and user-defined parameters,” Dykes said. “The key to maximizing algorithm performance is to use the one that best reacts to prevailing market condition.”
The study covered January to June 2010 and analyzed trade data processed by Tora through the company’s TORA Compass trading platform. Data from more than 15 brokers across three markets was analyzed. Orders reflect Tora’s client base which is a mixture of hedge funds, long- only funds and sell-side proprietary desks.
About Tora Holdings
Tora is Asia’s leading provider of advanced trading technology and financial services. Tora’s unrivalled solutions span the entire trading process, offering a full suite of trade execution capabilities in markets across Asia, North America and Europe. Tora’s high-performance EMS/OMS has been designed from the ground up by traders, and is currently used by traders at hedge funds, long-only funds and sell-side proprietary trading desks. Tora also provides clients with access to its unique liquidity pools including Asia’s leading non-displayed matching engine. Tora’s dedicated Asia trading desk delivers to buy-side clients unmatched Asia expertise and extensive analytics focused on best execution. Tora’s extensive suite of proprietary algorithms (trading and strategy-focused) is fully customizable and broker neutral. Tora has over 175 employees dedicated to Asia, with offices in Tokyo, Hong Kong, Singapore, New York, Los Angeles and San Francisco. Additional information is available at www.stage.toratrading.tw.
Tora Trading Services, Tora, TORA Compass, TORA Crosspoint and the Tora logo are trademarks or registered trademarks of Tora Holdings, Inc. in the United States and other countries. All other trademarks are the property of their respective owners.