In Algos we trust?

The buy side's emergent use of algorithmic execution for derivatives trades is just the latest instance of the technique's increasing pervasiveness. But as competition grows more intense, so does concern over improper use of algorithms. By Navroz Patel

Algorithmic trading has become a common-place feature of buy-side equity order execution. The technique, however, which involves the use of complex models to optimise the size and timing of orders, so that large trades can be executed cheaply with minimal market impact, is mutating. In a world of wafer-thin equity commissions, algorithmic execution is becoming an increasingly crowded space on the sell side, with providers - be they broker-dealers or agency-only firms - involved in a race to