The TRADE 56 - Page 72

[ A L G O R I T H M I C T R A D I N G S U R V E Y ] Upping the algo ante The arrival of MiFID II has shaken up capital markets and algorithmic trading has been no exception to this trend. The 2018 algo survey provides a glimpse into where hedge funds are setting their priorities in the early days of the new regulatory landscape. H edge funds have shown far higher levels of expec- tations from their algo providers in 2018 as the realities of the new electronic trading environment under MiFID II bed in. Hedge funds were asked to rate their algo providers across a series of metrics and capabilities within the first few weeks of the new trad- ing landscape under the MiFID II regulatory regime. Although these may be early days in the grander scheme of the Mi- FID II era, the results of this year’s survey indicate that hedge funds ships further down the road. The scores metered out by hedge funds in Figure 1 show both this and last year’s ratings for algorithm performance across 14 different categories and it’s clear to see that heightened expectations are already making an impression on how algo providers are viewed on the buy-side. The overall score for algo performance this year was 5.47, which, while a respectable score in the face of a changing trad- ing landscape, was still lower than last year’s average of 5.68. There were decreased year-on- “As with their long-only counterparts, hedge funds have shown far higher levels of expectations from their algo providers in 2018 as the realities of the new electronic trading environment bed in.” are already targeting key areas of algo functionality for review which could go some way to informing strategies and provider relation- 72 // TheTrade // Summer 2018 year scores in 12 of the 14 perfor- mance categories reviewed, with the only increase seen in the execu- tion consulting category (up from 5.35 to 5.59), which is to be ex- pected given the sell-side’s intense focus on this attribute in the run- up to, and hopefully beyond, the introduction of MiFID II. As was the case in the long-only section of this year’s algo survey, the highest score of any category was awarded for customer support, with a rating of 5.71, although this represented a 0.29 decrease year-on-year, so there is still work to do in this space for algo providers according to their hedge fund clients. Elsewhere there were decent scores in the anonymity (5.72), ease of use (5.76), dark pool access (5.6) and smart order routing capabil- ities (5.57) categories, with the latter facet recording a consistent year-on-year rating from hedge fund respondents. The most signif- icant areas where algo providers require improvement according to this year’s hedge fund respondents, were in the crossing (5.07), price improvement (5.22) and customis- ation (5.23) categories. The results suggest that hedge funds are