Bank of America has announced the launch of its latest algorithm, Instinct, which is designed to optimize execution on stocks whose liquidity may be difficult to predict, including small and mid-cap equities.
The algorithm is the ninth available through the company’s Electronic Algorithmic Strategy Execution suite of electronic trading tools.
Bank of America claims that Instinct represents a new breed of Adaptive Implementation algorithms, which analyze and react to market data in real-time during the course of the trade.
Unlike earlier generations of algorithms that trade along fixed, predetermined trajectories, Instinct uses a proprietary real-time estimation of available liquidity to continuously modify its execution trajectory throughout the lifetime of the order.
This technology is especially suited to less liquid small and mid-cap stocks, as it allows traders to identify and seize liquidity as soon as it becomes available, alleviating slippage.
Adaptivity is the next frontier in algorithmic trading, stated Dr Robert Almgren, managing director and head of quantitative strategies for equities at Bank of America. The ability to instantaneously change execution strategies during the course of a trade will give traders greater control over the outcome of that trade. Our aim is to provide algorithms that combine a solid quantitative foundation with the trader’s intuition, so that we can continue to help facilitate best execution for our customers and satisfy their unique trading objectives.