Cowen launches enhanced algorithmic trading solution
Cowen has launched a new algorithmic trading solution, the “Inaccessible Liquidity Adjustment,” to address fundamental shifts in the US market structure and help clients accurately navigate an ever-evolving investment landscape.
The mix in trading volumes driven by retail and institutional investors has caused a fundamental shift in US equity markets over the past two years. Cowen has found that individual stocks with higher rates of inaccessible liquidity, often driven by retail trading, tend to have higher execution costs, which can have measurable impacts on institutional investors. Cowen’s new algorithmic trading solution directly addresses the market dynamic related to increased volumes of retail trading which impact single-stock execution, mitigating increased costs for its clients.
Jennifer Hadiaris, Head of Global Market Structure at Cowen, says: “As we continually evolve and enhance our offerings to help our clients outperform within dynamic global market structures, we are incredibly excited to offer clients the ability to opt in to ‘haircut’ participation rates to account for inaccessible liquidity on a stock-by-stock basis. The ‘Inaccessible Liquidity Adjustment’ can automatically adjust to help clients avoid pursuing inaccessible volume in stocks where rates of retail trading may be higher.
“This offering is in line with our unconflicted commitment to the institutional business. The most recent algo update is part of our ultimate goal to present solutions to market structure challenges and to deliver consistent, performance-driven results for our clients. We also understand that each client is unique, which is why the Inaccessible Liquidity Adjustments – similar to Cowen’s other execution services – is customisable to fit each clients’ individual needs.”
Cowen’s new solution offers clients the option to adjust their trading for inaccessible liquidity on a single-stock basis as they execute orders in its algos. On a weekly basis, Cowen will calculate the percentage of inaccessible liquidity in each US security using the prior three months’ FINRA and off-exchange data. Clients will then be able to opt in to directly adjust participation rates in the algos, reducing aggression on a single stock basis to account for that specific stock’s rate of inaccessible liquidity. Clients can apply the Inaccessible Liquidity Adjustment to certain strategies, or they can apply it on an order-by-order basis.