ConvergEx rolls out multi-legged options algos
Trading technology company ConvergEx Group has released a new suite of algorithms designed to capitalise on growing interest among market participants in multi-legged options trading strategies.
Options markets have seen considerable growth in the US in the last few years, with the asset class showing double-digit percentage growth in exchange-traded options volumes every year from 2002 to 2008. Although volumes fell by 10% in 2012, the previous year had seen 11% growth and the year before 25%, according to figures provided by the FIA.
LiquidPoint is ConvergEx options technology business. The new multi-leg suite provides algos that are designed to simultaneously operate on several different exchange order books at once, meaning that trading strategies can be handled as a group rather than needing to be individually viewed and routed. The algos are called Complex order book sweep, Reserve, Hidden and Pulse.
The tools bring all the options exchanges’ complex order book feeds into one central view, so that traders can view their multi-leg orders in various different ways including by strategy, underling product, size, marketability and exchange. The technology has been built to allow traders to point and click to trade any multi-leg order, using direct market access or algo connections. Market data is also included in the package. The idea is to help improve liquidity discovery and provide better prices for clients.
Multi-legged strategies enable market participants to buy and sell options simultaneously to achieve their investment goals. The advantage of a multi-legged strategy is that the participant can be sure that both ‘legs’ of a strategy are transacted at the same time. Also, according to buy-side firm Fidelity, if a participant already owns the underlying stock the option is based on, a covered call strategy can be a relatively inexpensive way to increase return on this stock ownership. The asset manager recommends that calendar strategies may enable a participant to make a significant return even if the stock price stays flat for the duration of the strategy.
“The trading of multi-leg options is expanding rapidly in the listed options market,” said David Cross, head of options sales for ConvergEx’s LiquidPoint. “As more options exchanges move to open their own complex order books, LiquidPoint is aggressively enhancing its capabilities to provide customers with innovative and timely solutions to access the options market.”
The algorithms are accessible on LiquidPoint’s execution management system Blaze, as well as NXP LiquidPoint’s listed options liquidity pool. ConvergEx has been majority-owned by private equity and investment advisory firm CVC Capital Partners since July 2011. The company was previously owned by BNY Mellon.