Optimal Use of Algorithms: An Approach for the Buy Side

While algorithms are a tool in common use by the buy side, debates are ongoing over the degree to which algorithms are fashion, fad, or enduring fixture. Algorithms can certainly add value to the trading process by automating routine tasks and enabling traders to focus on more difficult trades. But the degree to which algorithms are a fad or fact of life depends upon how much their value can be quantified within the trading process. The current algorithmic environment lacks appropriate analysis tools to assist the trader in deciding which algorithm, from which provider, to choose in any particular circumstance. Furthermore, there is room for an improved business model to align both buy and sell side interests regarding algorithmic performance.