Knight Capital Group has introduced algorithmic pairs trading capabilities for institutions designed to increase fulfillment rates through improved liquidity sourcing and a flexible interface.
Knight’s pairs trading capabilities include access to Knight’s liquidity in addition to displayed and dark markets using FAN technology.
It has the flexibility for traders to create their own strategies and support for complex pairs trading strategies, including multiple combinations of single securities, inverse pairs and set-up and unwind functionality in a single pair.
"The market environment in 2010 is ideally positioned for pairs trading strategies," says Joseph Wald, managing director, Knight Direct. "After the turmoil of the last several years, investors are more interested than ever in managing risk by taking a market neutral approach while residual uncertainty remains. At the same time, merger and acquisition activity is expected to continue to rise due to a reinvigorated investment banking market, while robust issuance of preferred stocks has created more opportunities to pair preferreds with their common stock counterparts. Knight has the algorithmic pair trading technology to help institutional traders make the most of these opportunities."
Traders use pairs trading strategies to capture the spread between two or more related securities, keeping risk low by remaining market neutral.
Knight has combined pairs trading capabilities with FAN, Knight’s aggregation technology that sweeps and posts orders simultaneously in displayed and dark markets. FAN employs smart order execution technology to adapt to real-time trade executions and re-circulate an order to destinations where trade executions are taking place.
Knight’s pairs trading and algorithmic suite are available through Knight Direct EMS, a broker-neutral electronic trading platform covering multiple asset classes, via a direct FIX connection, or major OMS and trading system providers.
