Multiple orders for the same symbol and side sent at different times for different accounts or portfolios is a common challenge across firms globally, according to Nigam Saraiya, Chief Product Officer at BestEx Research Group.
“It is not unique to any one region, market, or firm,” he told Traders Magazine.
To address this issue, BestEx Research Group, an independent provider of high-performance algorithmic execution and measurement solutions for equities and futures trading, has recently launched Order Aggregation functionality within its execution algorithms.
“Order aggregation tackles this seamlessly for the customer with zero disruption to their workflow,” commented Saraiya.
“Every element of our product design is intended to improve either trading costs or the workflow–or both–as in the case of order aggregation,” he said.
Saraiya said that order aggregation increases the efficiency of algorithms’ scheduling, order placement, and liquidity-seeking behavior by combining parent orders on the same symbol and side, which ultimately reduces clients’ trading costs.
Execution of multiple parent orders for the same instrument–sent at the same time or different times–often results in higher trading costs due to faster than optimal execution speeds, suboptimal limit order placement, and missed block trading opportunities in fragmented markets, he added.
BestEx Research’s Order Aggregation addresses this challenge by consolidating orders on the same side of the market, optimizing algorithm performance and reducing trading costs.
According to Saraiya, clients can opt in to this feature without altering their workflow, and fills will be allocated back to each parent order in real time–even though BestEx Research algorithms are trading them as a single block order.
Additionally, institutions managing parent orders from different portfolios arriving at various times can use this functionality to meet regulatory and compliance requirements, ensuring fair and equitable fills across all portfolios without the need to develop complex order aggregation capabilities within their OMS.
BestEx Research’s pro-rata fill allocation ensures that each parent order, even those belonging to different accounts, is fairly treated.
Order aggregation functionality is particularly relevant for trading desks that deal with large, complex orders and want to ensure fair allocation without disrupting compliance workflows.
Nordea Asset Management was among the first to put the new functionality into action.
“For us, order aggregation is an absolutely essential feature,” Eugene Seo, Head of Equity Trading at Nordea Asset Management, said.
“It is necessary that multiple orders in the same security do not compete against each other but instead are aggregated and represented as a singular order in the market. Aggregating them helps us reduce signaling risk and ensures fair volume distribution across working orders,” he told Traders Magazine.
Additionally, aggregation functionality ensures that volumes are distributed on a pro-rata basis across working orders so that their investment teams are being represented fairly, he said.
“It ensures volumes are distributed on a pro-rata basis, so our investment teams are represented fairly,” Seo added.
Seo believes that Order Aggregation is important not just for reducing impact but also for seeking block liquidity, since aggregated orders can become eligible to trade against larger orders with significant minimum quantities.
“Given our large average order size, our reliance is on conditional order types to achieve volume through larger and less predictable fills,” he said.
Order Aggregation can be configured upon request to meet the specific needs of BestEx Research clients.
Both the eligibility requirements for aggregation and the fill attribution process are customizable to suit different workflows and preferences. Sell-side firms utilizing BestEx Research’s AMS can selectively offer this functionality to their buy-side clients, tailoring the criteria to meet each client’s needs.
