Cutting Edge introduction: The trouble with algorithmic execution

New set-up allows fast, tractable optimisation of trade execution, without neglecting downside risk

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Market impact, or the effect of large orders on market price, is a problem investors have always faced. If a trade cannot be executed in one go, because of a lack of liquidity at the prevailing market price, the obvious solution is to break it into a series of smaller trades – the risk, of course, being that the market moves against the investor while those trades are being executed. This is known as the trader's dilemma, but thanks to advances in trading technology over the past decade