Daedalus Advanced Trading Strategies Mgmt System

DAEDALUS(R) Advanced Trading Strategies

Daedalus, a new module of part of Broker System’s OMS, aims to support advanced strategy based trading for benchmark execution and market making, as well as, smart order routing. In more details the system provides the following capabilities:

  • Strategy monitoring and adjustment: Aims in minimizing execution shortfall relative to a specified benchmark (VWAP, TPOV, TWAP). The system is able to monitor order execution comparing ideal trade trajectory planning based on a preselected benchmark to the real order execution. An order could be either a manually entered order or a FIX Care order coming through Broker System’s Ariadne FIX Engine.
  • Order Execution & Smart Order Routing (only partially implemented): Partial order execution using central Broker System’s OMS or Stock Exchange Terminal providing consolidated management and monitoring. Moreover, a smart order routing module is under development for selecting the best bid/ask price from all connected liquidity providers taking into account the depth of the market so you can benefit from each trading operation.
  • Execution Report Handling: The system is able to handle execution reports (either FIX or consecutive updates) taken into consideration both simple trades and packets allowing flexible management and what-if scenarios.

Daedalus modules and important features

Daedalus incorporates the following modules:

1)      Strategy monitoring and benchmark execution:

Aims in minimizing execution shortfall relative to a specified benchmark (VWAP, TPOV, TWAP). The system is able to monitor order execution comparing ideal trade trajectory planning based on a preselected benchmark to the real order execution. An order could be either a manually entered order or a FIX Care order coming through Broker System’s Ariadne FIX Engine. At this time the following strategies are currently supported:

  • Time Weighted Average (TWAP): aims to execute trades evenly over a specified time period. A volume percentage can be also defined, serving as an upper limit for preventing the TWAP order comprising too much of the traded volume. 
  • Target % of Volume (TPOV): Participate with the volume at a user specified rate in order to match a percentage of the volume. In more details, target value dynamically adjusts to real time changes of volume in order not to exceed the specified percentage of the total executed volume in Market. In case of a Limit Order then TPOV calculation take into consideration only trades above (Sell) or bellow (buy) that limit.
  • Volume Weighted Average (VWAP): Minimize the execution shortfall relative to intra-day VWAP. In order to achieve this we pre-calculate a historic stock volume distribution based on a moving window of the latest user defined number-day intraday data. Trade trajectory plan passively emulates this ‘reference’ distribution and do not respond to changes of intraday liquidity. In case of a Limit Order then MarketVWAP calculation take into consideration only trades above (Sell) or bellow (buy) that limit. Moreover, a volume percentage can be also defined, serving as an upper limit for preventing the VWAP order comprising too much of the traded volume.
  • Multiple Strategy support and Variable Limit Orders: An order could be related with multiple strategies, each one defined and activated for a specific duration.  This way, all kind of changes in order strategy are supported, including variable limit orders. Finally, the system provides both analytical and consolidated monitoring capability.

2)      Order Execution & Smart Order Routing:

  • Order Execution: Partial order execution using central Broker System’s OMS or Stock Exchange Terminal. A care order can be partially executed through multiple real orders and/or blocks in stock exchange.
    • Order Handling: The system provides for order management capabilities (place, edit, and cancel). Moreover it provides the ability to send multiple preconfigured orders at once (eg at the opening or at the close).
    • Automatic Matching and consolidated management: Real orders are automatically matched with related care order providing consolidated management and monitoring.
    • Order state transition and alerting: Based on -in market- orders and executions and specific business rules the system automatically changes order status (Pending, New, Working, Filled, Completed) and provides alerts when a specific condition is met (eg. Risk of Overfill, Overfilled etc)
    • Blocks handling: Break the quantity of block to one or more working care orders
    • What – if – scenarios: Using either blocks or virtual trades
  • Compliance reporting: the system logs full order flow & lifecycle
  • Smart Order Routing (partially implemented): Route orders to alternative venues either based on pre configured rules or in order to take advantage of extra liquidity and reduce trading costs. Provides:
    • User defined route selection based on pre defined criteria set.
    • Auto route selection in order to achieve best execution of trades while minimizing market impact. In more details, the system automatically selects the best bid/ask price from all connected liquidity providers taking into account the depth of the market so you can benefit from each trading operation. It also enables venue prioritization based on transaction costs.
    • Consolidated Order Book: The system is able to maintain a multi market consolidated order book for specific symbols.

3)      Execution Report Handling:

The system is able to handle execution reports (either FIX or consecutive updates) taken into consideration both simple trades and blocks allowing flexible management and what-if scenarios analysis. This module provides the following features:

  • Monitor and Analysis of real executions, average prices, total/partial quantities etc.
  • Manual or Auto (for FIX) Execution Report Management:
  • In case of FIX orders Auto is the default mode where executed trades are forwarded back through appropriate FIX execution report messages as they are received.
  • In manual mode the user is able to define a manual execution report based in real executions. In case of fix the user has the ability to send it through FIX.
  • Edit / Cancel an already sent execution (sent order bust for FIX)
  • Configurable Done For Day Messages (for FIX)
  • What – if analysis using either blocks or virtual trades

Daedalus Architecture and XRHMA Suite related modules

The following diagrams present incoming and outgoing information order flow. Moreover, related XRHMA Suite’s modules and their interconnectivity are depicted.