Make trading smart and swift for large orders with Execution Algos
Reduce the market impact of your orders by slicing them in a hassle-free way
Execution Algos
Time Weighted Average Price (TWAP) Order Slicing
It is an accumulation strategy used for buying and selling desired quantity of an underlying symbol in a user defined time period
Time Weighted Average Price (TWAP) Band Strategy
It is also an accumulation strategy that takes the TWAP Order Slicing strategy and adds one condition on top, i.e. the Last Traded Price of the asset remains in a user specified range
Averaging
This is a strategy designed for Investors who would like to do Averaging when the market moves by specified points in the desired direction.
Benefits of Execution Algos
Balances market impact with risks of executing large orders in one go
Simultaneous automated checks on multiple market conditions
Automated execution of large orders
Reduces psychological and human errors
Speed of execution
Orders are precisely timed to hit the market
No lag between the execution price and the specified price
Steps to Open an account and get started with Execution Algos
Verify Personal Details
Self KYC
e-Sign
To experience Execution Algorithm, Download the App now
Faqs
In short, Execution Algos are automated transactions. They are tools for executing large orders using an automated, programmed set of instructions with various parameters like time, price, volume etc. or combinations of these parameters.
The main difference between Execution Algos and the rest of the trading algorithms is that Execution Algos are not designed to generate profit, but rather to lower market impact cost.
Known variously as “Market Impact”, “Impact Cost” and other combinations, this is that part of transaction cost which is incurred due to
(1) size of order and
(2) market microstructure
at the given time. It can be approximated as the relation of the order size to the liquidity.
For eg. : if a buy market order for 100 shares of XYZ script is placed when top level ask price has 1000 quantity, the order will take liquidity without any impact. However, if the same order is placed when top level ask has only 10, and rest of the liquidity is spread to much higher prices, the market order will tear through the order book, eating liquidity and incurring a huge market impact cost on the trader.
The main purpose of Execution Algos is to lower market impact for large orders. This is done by devising ways to automatically judge how to place an order and for what price. TWAP and VWAP are two of the most common Execution Algos which work intuitively, and by bringing down impact cost, also bring landed/average price more in line with the market VWAP for the day.
VWAP is commonly known as an indicator, but for investors, it is a benchmark for their executions. For a given script, it is simply the volume weighted average price for the day. When buying or selling a large amount of a stock, the dealer’s or algorithm’s landed average price is compared to that day’s VWAP to see if the orders were placed optimally.
Whenever you need to transact an order that’s larger than available liquidity. A rule of thumb is to look at the top 5 bid/ask for the side you want to take liquidity from: if you want to buy, look at the ask side to see if:
• Is your order larger than the best ask volume?
• If yes, then how many levels of asks will your order size eat through?
• If many levels, then what is the spread between the best level and worst?
For example, let’s assume that the ask order book looks like this: [(10, ₹100.00), (11, ₹100.05), (5, ₹112.00), (15, ₹122.00), (200, ₹135.00)]. Assuming I want to buy 100 shares of this script, if I place it all in a single order, I will tear through the order book and end up overpaying. My landed cost would have been 10×₹100.00 + 11×₹100.05 + 5×₹112.00 + 15×₹122.00 + 59×₹135.00 = ₹12455.55, or ₹124.56 per share.
However, if I split my order into 10 orders of 10 quantity each, and send them at a relaxed interval of, say, 5 minutes, this will make sure that the order book is replenished with liquidity. Assuming that the market is mean reverting, I can be fairly confident of landing a cost in the range of ₹100.00 itself. This is what Execution Algos like TWAP do.
All the customers of ICICIdirect having a trading account can trade using the available Algorithms. The customers need to download the latest ICICIdirect Markets app to use these algorithmic strategies.
A customer needs to download the new ICICIdirect Markets App to start trading using Execution Algos. After you sign-in on Markets app, under Tools tab, click on Execution Algos. In this tab, click on "+" icon given just above the Bottom Navigation Bar. It will enable the customer to add new Execution Algo.
Execution Algos can be placed using the new ICICIdirect Markets app in segment of Equity Cash and Derivatives- Futures & Options.
There is no additional charge for using these Algos. Existing brokerage and statutory charges will be levied as applicable for products.