Information Leakage, Algo Transparency Are Top Concerns

ITG Survey Finds Buyside Traders Seeking Custom Features and Increased Transparency

The ITG survey, conducted in early March, polled buyside professionals who participated in an ITG webinar on reinventing algos. The nearly 70 respondents represent institutional investors with assets under management (AUM) ranging from approximately $130 million to $1.8 trillion, with median AUM of $14 billion.

Survey Findings:

  • Custom Flow: While most buyside traders prefer customized algos to off-the-shelf versions, only 24% send more than half of their daily order flow to custom algos.
  • Strategy Improvements: The traders polled would like to see improvements in more complex algo strategies such as implementation-shortfall (IS) algos (60%) and liquidity-seeking algos (24%). Traders saw less need to change VWAP algos and Close algos (10% and 6%, respectively).
  • Reinventing Algos: Buyside traders would like to see several improvements to the algos offered today. 73% would like to see more outcome-focused reporting, with details on information leakage. 61% call for increased algo transparency and easier-to-understand strategies. 39% want to see algos which adjust based on a trader’s execution history and investment style.