Pragma Securities
Execution Consulting Sponsored by Bloomberg Tradebook
28 March 2012
White Paper: To Hop (The Queue) Or Not To Hop (The Queue)
One of the fundamental decisions that every trading algorithm needs to make as it feeds child orders into the market is where to route them.
In a previous research note we reported some empirical results demonstrating that, generally, the market has a strong preference for routing aggressive orders to the cheapest venue that displays the best price.
In this note, we demonstrate how this market structure can be exploited by a clever algorithm to obtain an all-in performance improvement when posting limit orders by effectively “hopping the queue.”
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