By Nasser Khodri, APAC Managing Director for SunGard’s global trading business
When SGX REACH goes live in the Singapore Exchange (SGX) on August 15, the republic’s trading community can look forward to reaping the benefits associated with advanced trading technologies, such as improved performance, higher execution price, enhanced productivity and added services.
SGX REACH is the exchange’s new software matching engine that will provide remisiers with advanced algorithms so that they can send their orders in at the right time, cover their positions, and ensure their orders are executed.
What’s new in the SGX REACH trading platform? It will offer six new order modalities, including Market Orders and Market to Limit Orders, both with the objective of guaranteed execution.
SunGard, a long-time partner of SGX, on 21 and 22 June hosted a two-day SGX event in Singapore to educate more than 400 brokers and remisiers about SGX REACH – what it is, what it can do for them and how they can use it.
As a software vendor and leading provider of algorithmic trading solutions, SunGard is now all geared up to provide the software that will allow brokers in Singapore to work with the REACH system.
Algorithmic trading is currently widely used in Europe and the US, with many of the traders and brokers there aware of what it is and why it is necessary. In Asia, while many international brokers offer algorithmic trading solutions, local brokers are only now getting onto the algo bandwagon.
It is akin to something of a revolution for them. For example, a dealer at a Chinese broking firm in Hong Kong was all praises for algo trading, saying: “This algo is impressive! Before I used to check the price manually and update the order accordingly. It took a long time and I had to keep my eyes on the screen every second. Now I just leave the algo alone and it’s so much faster.”
The use of algorithmic trading is growing very quickly in Asia. According to research and consulting firm Celent, Singapore’s current usage level of 38% is expected to rise to 50% next year; and Hong Kong’s from 48% to 62%. This compares to a 60% current usage level in the US. Algo trading is proving to be a trend that brokers need to follow, or risk being left behind.
There are four main reasons for brokers to use algorithmic trading. The first is improved productivity. With algo trading, brokers can take more orders using the same level of technology because algorithms can relieve traders of parts of their workload.
Secondly, algos can improve order execution performance and boost the price of execution because they allow brokers to take advantage of the opportunities that arise as a result of issuing their orders at greater speeds; as compared to issuing them at slower speeds, if they were to be working manually.
Thirdly, algos help brokers empower their clients. When a client asks for a VWAP (volume-weighted average price) or a TWAP (time-weighted average price) order, for example, brokers need to be able to fulfill the request. It becomes a question of competitiveness. If the broker doesn’t have what the client wants, the broker will be at a disadvantage.
Lastly, algos are good for handling market specificities, giving brokers the flexibility and customisation ability to meet their clients’ needs.
At a more advanced level, algorithms can help traders attempt to be one of the first to enter the market when it opens by sending orders at a millisecond precision. They can help traders profit from tiny discrepancies and market open volatility and also help them automatically handle the force key rule, a specificity of the Singapore Exchange.
Have you ever lost an opportunity because you were too slow? Do you sometimes feel overwhelmed when constantly monitoring prices? Have you ever wished to have peace of mind during the trading day?
If your answer to any one of these questions is yes, can you afford not to have algo trading on your side?
