Accessing Liquidity: SIGMA and SIGMA X
Download
1 / 17

accessing liquidity: sigma and sigma x - PowerPoint PPT Presentation


  • 399 Views
  • Updated On :

Accessing Liquidity: SIGMA and SIGMA X. Presentation to Bright Trading September 17, 2008 Denise Fiacco, Jack Mahoney, Justin Lerner. Then and Now: Listed Shares. Then and Now: Listed Shares. 2001. 2008. 2008 1. 11%. ~ 5%. 3%. Regional. Broker-dealers. Broker-dealers. CHX. NYSE.

Related searches for accessing liquidity: sigma and sigma x

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'accessing liquidity: sigma and sigma x ' - johana


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

Accessing Liquidity: SIGMA and SIGMA X

Presentation to Bright Trading

September 17, 2008

Denise Fiacco, Jack Mahoney, Justin Lerner


Then and now listed shares
Then and Now: Listed Shares

Then and Now: Listed Shares

2001

2008

20081

11%

~5%

3%

Regional

Broker-dealers

Broker-dealers

CHX

NYSE

Other exchanges

7%

NYSE Hybrid

NSE

NYSE Group

53%

2%

<40%

84%

BATS

BSE

6%

PHLX

ARCA

13%

~3%

ECN’s

Nasdaq Single Book

4%

>25%

INET

<3%

Pipeline

Posit

2%

Posit

Liquidnet

SIGMA X

Liquidnet

Crossing networks

MatchPoint

1. Jan 08. Single-counted share volume, internal matches only, all Tape hours. For some venues the estimates are rough approximations.

Shapes not in proportion to actual market share.


Market landscape fragmentation
Market Landscape: Fragmentation

Complex US Liquidity Landscape

** Reflects TABB group reported volumes for June 2008.


Simplified ecn landscape
Simplified ECN Landscape

Simplified, Consolidated ECN Landscape

** Reflects TABB group reported volumes for June 2008.


Complex, Fractured Dark Pool Landscape

** Reflects Rosenblatt Securities reported volumes for July 2008.


Dark pool competition
Dark Pool Competition

The Actual Numbers …

** Reflects Rosenblatt Securities reported volumes for July 2008.


The sigma smart router

Smart Routing: SIGMA

The SIGMA Smart Router

SIGMA X

  • SIGMA creates a “game plan” for every order it receives

  • The original parent order is decomposed into child orders according to:

    • NBBO

    • Internal ranking table

    • Depth of book feed (real time from all major pools of liquidity)

  • Orders sent to pure electronic exchanges are routed with an IOC (Immediate or Cancel) time-in-force

  • Orders sent to partially electronic exchanges (Hybrid NYSE) are routed with a DAY time-in-force

  • Prior to routing to public markets, SIGMA will search for liquidity in SIGMA X

    This is an iterative process:

  • SIGMA creates a new game plan for the balance of the order

  • Subsequent game plans depends on whether the order receives a fill or an out from a particular venue (no fill at all from particular destination, they are removed from the game plan at that quote, but if quote moves we may go again irrespective of whether we were filled at prior quote)

  • Posting destination(s) fully customizable

SIGMA Smart routed orders

Customer ATS

XLPs

Public


SIGMA Listed vs. OTC Executed Volumes

Listed Breakdown

OTC Breakdown


Sigma x

GSET Flow Diagram

Algo Orders

Dark

Pools

Public

Markets

SIGMA Smart

Routed Orders

Customers

ATS

Liquidity

Providers

SIGMA X

SIGMA X Posted Orders

REDIPlus Orders to SIGMA X

REDIPlus Portfolio Trader Waves to SIGMA X

REDIPlus X-Posted Tickets

FIX Orders to SIGMA X

R

R

R


SIGMA X: Executed Flow Composition

Algorithmic

DMA

Customer

ATS

Liquidity

Providers

SIGMA X Directed

GSCO

SIGMA Routed

Customer Pool: 90%

Liquidity Providers:10%


SIGMA X: Execution Breakdown by Market Capitalization/Sector

Market Capitalization

Sector

Small 11%

Large 56%

Mid 33%

• Volumes in various sectors track the market closely, overweighed in IT, underweighted in Financials.


SIGMA X: Order Types and Parameters

Order Types: Limit, PEGbid, PEGmid, PEGask, Ping (limit IOC)

• All peg orders float with the NBBO on the side specified. For example, a buy order pegged to the bid floats with the national best bid

• All possible spread capture/price improvement goes to the liquidity provider


SIGMA X: Customer ATS Execution Analysis

Large 56%

• Limit and PEGmid most common. PEGbid/ask used much less frequently.

• ~16% of executions are limit buyers interacting with limit sellers.

• PEGmid buyers interacting with limit sellers comprise 31% of executions, while PEGmid sellers interacting with limit buyers comprise an additional 31% of executions.

• An additional 18% is PEGmid buyers interacting with PEGmid sellers.

• ~34% of PEGmid executions occur at a more favorable price (34% (16.8/50)) of PEGmid buyers execute on the bid, and 34% of PEGmid sellers execute on the offer).

* Sample period is from January 2, 2008 – April 4, 2008


SIGMA X: What We Do To Prevent Gaming

• Real-time monitoring and alerts (work in progress): We monitor all orders that are directed to SIGMA X and are alerted to large-sized orders, high participation rates, excessive price moves and abnormal spreads.

• Advanced monitoring tools: graphical interface that allows us to view a particular execution along with all relevant quote/trade data.

• Regular monitoring of historical performance: automated tools and reports to monitor the performance of clients that provide liquidity.

• Internal checks and balances on DMA and algorithmic flow: ability to set default SIGMA X anti-gaming measures (MXQ, opt-out of certain flows, etc.) at both client and order level.


SIGMA X: What You Can Do To Prevent Gaming

• Prevent ‘fishing’: use an MXQ (minimum execution quantity) on orders directed to SIGMA X to avoid small fills. This quantity is the minimum size you are willing to cross and can be set as a default per user or on an order-by-order basis.

• Reduce impact: be sure to specify a bottom/top when using a peg order type to avoid excessive price impact. Keep in mind that dark executions do hit the tape.

• Call us: if you have any questions or concerns about a particular order or execution, call your representative.


SIGMA X: Executed Volume Trend

• Average execution size = 600 shares

• 1B shares ADV intractable flow

• 21% of GSET algorithmic executions occur in SIGMA X

• SIGMA X latency = less than 1 ms

• 4,000 unique symbols executed per day


2008 Global Electronic Trading Disclaimer

This message is not the product of the Global Investment Research Department or Fixed Income Research. It is not a research report and is not intended as such.

Non-Reliance and Risk Disclosure: This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of our clients. It does not constitute a recommendation or take into account the particular investment objectives, financial conditions, or needs of individual clients. Before acting on any advice or recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Certain transactions - including those involving futures, options, equity swaps, and other derivatives as well as non-investment-grade securities, foreign-denominated securities and securities, such as ADRs, whose value is influenced by foreign currencies- give rise to substantial risk and may not be available to or suitable for all investors. This material is not for distribution to private customers, as that term is defined under the rules of the Financial Services Authority in the United Kingdom; and any investments, including derivatives, mentioned in this material will not be made available by us to any such private customer. The material is based on information that we consider reliable, but we do not represent that it is accurate, complete or up to date, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material and only represent the views of the author and not those of Goldman Sachs, unless otherwise expressly noted.

Legal Entities Disseminating this Material: This material is disseminated in Australia by Goldman Sachs JBWere Pty Ltd (ABN 21 006 797 897) on behalf of Goldman Sachs; in Canada by Goldman Sachs Canada Inc. regarding Canadian equities and by Goldman, Sachs & Co. and/or Goldman Sachs Execution & Clearing, L.P. (all other materials); in Hong Kong by Goldman Sachs (Asia) L.L.C.; in Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs JBWere (NZ) Limited on behalf of Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W); in Europe by Goldman Sachs International (unless stated otherwise); in France by Goldman Sachs Paris Inc. et Cie and/or Goldman Sachs International; in Germany by Goldman Sachs International and/or Goldman, Sachs & Co. oHG; in Brazil by Goldman Sachs do Brasil Banco Múltiplo S.A.; and in the United States of America by Goldman Sachs Execution & Clearing, L.P. (or when expressly noted as such, by Goldman, Sachs & Co.) (both of which are members NASD, NYSE and SIPC). Goldman Sachs International, which is authorized and regulated by the Financial Services Authority, has approved this material in connection with its distribution in the United Kingdom and the European Union. Unless governing law permits otherwise, you must contact a Goldman Sachs entity in your home jurisdiction if you want to use our services in effecting a transaction in the securities mentioned in this material.

Reproduction and Re-Distribution: No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without our prior written consent.

Conflicts with Agreements: If there is any conflict between this material and the Intermediate Customer Agreement, Professional Client Agreement, Client Access Agreement or the Electronic Access and Trading Agreement (each, an “Agreement”), the relevant Agreement will govern.

System Response and Access Times; Algorithmic Models: System response and access times for direct market access and algorithmic trading may vary due to market conditions, system performance and other factors. Goldman Sachs’ algorithmic models derive pricing and trading estimates based on historical volume patterns, real-time market data and parameters selected by the algorithmic user. The ability of Goldman Sachs’ algorithmic models to achieve the performance described in these materials can be impacted by significant changes in market conditions such as increased volatility, price dislocations, material market events or news or trading halts. In addition, systems or communications failures may impact Goldman Sachs’ ability to access the markets and, consequently, the performance of the algorithmic models. Factors such as order quantity, liquidity, spread size and the parameters selected by the algorithmic user may impact the performance results.


ad