ITG Creates Algorithm for Investors Trading Around Market Close

Investment Technology Group Inc. is introducing an algorithm for customers trading at the end of the day, when institutional investors tend to do a large amount of buying and selling.

The automated trading strategy seeks to determine in real time how much of the order should be executed before or during the auction that sets the closing price for exchange-listed securities, Jeff Bacidore, New York-based head of algorithmic trading at ITG, said in a telephone interview.

“People are saying, ‘We know the close is a very liquid time of day. How do we trade most effectively around it?’” Bacidore said.

During the 4 p.m. auction, exchanges match requests to buy and sell stock as part of the process to calculate closing prices. A stock’s price may be affected when exchanges disseminate information about the difference between buy and sell interest, called imbalances, ITG said. The company’s algorithm determines when it makes sense to trade before that data is released.

NYSE sends data on imbalances at 3:45 p.m. and Nasdaq Stock Market at 3:50 p.m. The 30 minutes before the auction usually account for 18 to 20 percent of the day’s volume, according to the New York-based brokerage.

The algorithm processes the size of the order and other data to determine how much to put in the auction and whether to trade before the imbalance information is released. The product will be available to clients starting today, replacing a previous ITG algorithm focused on the close of trading.

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net