Smart Order Routing & Execution Management

Execution management, a subset of smart order routing, refers to any quantitative model that automatically routes and/or executes orders according to the parameters built into the model.

Algorithms are designed to identify trading opportunities, determine when to run and generate results based on specific benchmarks, such as Volume Weighted Average Price (VWAP) and Time Weighted Average Price (TWAP).

Additionally, execution management systems need to provide functionality for order processing, connectivity to exchanges, ECNs and dark pools, and integration with existing systems that include order management, risk management, compliance, and more.

For example, one brokerage firm that has implemented Coral8 CEP-based execution management application offered five different parameterized algorithms for their clients to choose:

• Direct execution
• VWAP and TWAP based spreads
• Spray algorithm
• AK47 algorithm
• Volume participation algorithm

The algorithm drives the total number of orders to be traded at a given point in time. Each of the algorithms is represented in separate modules, allowing the brokerage firm to easily add more algorithmic modules over time.

As each trade is completed, the order "state" is updated based on trade data flowing back into the application. Market data feeds into constant calculation of market metrics, which is used by the algorithms to determine the timing and quantity of trade orders.

In execution management, the superior performance, flexible modularity and sophisticated language of Coral8 Engine™ create a tremendous advantage. Coral8 customers can quickly implement an initial execution management framework, and then easily extend the framework over time with new plug-in modules to offer more sophisticated algorithmic options.