Active Traders Want More Info On Broker Algos

Aug 30 2013 | 10:15am ET

The more shares a hedge fund trades, the more interested it is in how those shares are traded, a new survey shows.

Hedge funds that trade more than a million shares a day want more information about the algorithms used by their brokers, according to the Tabb Group poll. Some 79% of such firms question their brokers about those algorithms, compared to just half of hedge funds trading less.

Three-quarters of the larger hedge funds find the information provided in response to their queries helpful. Just 36% of the smaller hedge funds concurred.

"Given the myriad idiosyncrasies from one broker's algo to the next, the task of understanding the core logic and capabilities of a given algo has never been more challenging," Adam Sussman and Colby Jenkins, who wrote the Tabb report, said.

Tabb also polled hedge funds about their favored algorithm providers, finding Credit Suisse, Morgan Stanley, Goldman Sachs, Bank of America Merrill Lynch and JPMorgan Chase top the list.


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