compile fiches algos

8/3/2019 Compile Fiches Algos

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Algorithmic Trading

EXECUTION SERVICES


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Algorithmic TradingPart of the Crdit Agricole Group, CA Cheuvreux is the leading pure-agency European equity broker.

Its historical multi-local model positions CA Cheuvreux as a cutting-edge outperformance provider for

its 1,200 institutional investor clients. CA Cheuvreux offers extensive, high value-added services in

Research, Sales and Execution. With 90 analysts and economists, and unparalleled coverage of 700

stocks, CA Cheuvreux is continuously ranked in the Top 5 or European Country research and a Top 3

European Corporate Access provider.

CA Cheuvreux provides extensive market access to 100 execution platorms worldwide including all

major MTFs and dark pools. Ranked No. 3 in Sales Trading Client Service & Trading Ideas/Updates,

CA Cheuvreuxs execution specialists offer a wide spectrum of frst-class products: DMA, Algorithmic

Trading, Global Portfolio Trading, Equity Swaps and its own internal crossing engine Blink.


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YOUR ALGO CONTACTS

Europe: US & Canada:

+ 44 207 621 66 [email protected]

+1 212 492 [email protected]

* Through our sister company CLSA

TRUE AGENCY BROKERAGE

CA Cheuvreux is a member o the AA-rated

Crdit Agricole Group, one o the worlds

leading banking institutions. With 120

execution specialists on 100 execution

venues, CA Cheuvreux oers an access to

global markets - Europe, the Americas, the

Middle East, Asia Paciic* and Arica.Fast, secure execution with zero inormation leakage

STRIVING FOR EXCELLENCE

Giving you an edge through continuous

improvement o our algorithmic tools and the

development o new models.CA Cheuvreuxs advanced research platorm ensures a

quality algorithmic model perormance. Our edge comes

rom our advantageous market position and subsequentcommitment to cutting edge technology.EXTENSIVE

EXTENSIVE MARKET KNOWLEDGE

In-depth understanding o local markets com-

bined to a broad range o sophisticated trading

strategies.CA Cheuvreux is a member o all the major stock

exchanges and oers a reliable point o entry to global

markets via partnerships with others entities o the Crdit

Agricole Group.

LEADING EXECUTION TOOLS

Our state-o-the art selection o execution

tools is available to help you trade in line

with the market, capture liquidity or increase

alpha return.CA Cheuvreux oers a range o products that comple-

ment and enhance the service oering or you and can

be used advantageously in conjunction with Algorithmic

tools. This sophisticated range o trading tools isconstantly evolving to meet changing client demands.


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CA Cheuvreuxs algorithms fall into two main categories: benchmark and liquidity seeker.

Benchmark algorithms (VWAP, Implementation Shortfall, % Volume, Target Close, TWAP,

InLine) are better suited for longer duration orders (from 30 minutes to one day, depending on

the liquidity of the traded stock), because they control the execution rate. Conversely, the shorter-

term liquidity seekers (CrossFire, Hunt, Iceberg) can execute 100% of an order very rapidly if

market conditions are compatible with the order parameters.

Optimal execution o portolio transactions, Journal o Risk, Vol. 3, No. 2. (2000), pp. 5-39, by R.F. Almgren, N. Chriss.See Rigorous Strategic Trading: Balanced Portolio and Mean-Reversion, Journal o Trading, Vol. 4, No. 3. (2009), pp. 40-46, by Charles-Albert Lehalle, Head o Quant Research at CA Cheuvreux, or The impact o liquidity ragmentation

n optimal trading, Institutional Investors Liquidity Guide (2009), also by Charles-Albert Lehalle.Optimal split o orders across liquidity pools: a stochastic algo rithm approach, LPMA preprint 2009 by Gilles Pags, Sophie Laruelle, Charles Albert Lehalle; presented during a guest lecture at the quantitative inance seminar o Columbia

University and New York University in December 2009.

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Tradedvolumes(pct

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Intradayvolatility

(bp/10min)

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Figure 2: A typical European volume curve (at left) and volatility curve (at right). Three usual effects can be seen: (1) During the first hour of trading, the impact of the overnight price change

can be seen in the markets: more shares are traded, and prices may move more than usual. (2) During the last hour of trading, investors have to settle their positions for the night. More

hares are traded and volatility increases. This latter effect stems from the fact that investors who are eager to trade before the end of the day are ready to pay some market impact, rather

han not having their trades executed. This market impact generates unpredictable moves in the market price, decreasing the level of certainty on the price that can be traded. (3) ForEuropean markets, North American news and the opening of North American exchanges have an impact on the intra-day rhythm: a peak in volume and volatility can be observed one hour

before the opening of US exchanges, and once open, traded volumes increase.

Slices are then sent to the market within this envelope (more aggressively when the execution curve is close to the minimum boundary,and more passively when it is close to the maximum one).The trading envelopes are computed in real time using usual volume curves, usual volatility curves and market impact models.

Mechanism 2: optimal adjustment of price and quantity to adapt to market conditions

Most o our benchmark algorithms have a eature enabling them to react to intra-day volatility changes. Our CrossFire algorithm alsouses such a mechanism to capture liquidity on any combination o lit and dark venues, adjusting prices and rebalancing quantitiesn order to take into account market lows. As in the case o trading envelopes, this eature is derived rom state-o-the-art research,namely the high-requency component o the Almgren - Chriss ramework3.

This mechanism is based on two empirical acts: irstly, volatility is a good proxy or a real spread and can thus be used to choosehe optimal price o a passive order. Secondly, since volatility is a non-directional measurement, it has to be accompanied by theexecution low that is in practice captured by an algorithm at a given level o price (the aster an order is executed, the more likelyhe market is moving in your direction). The combination o volatility (public inormation) and your ill rate (private inormation) providesa methodical way to control the price levels and the size o the slices o the algorithms.

OUR ALGORITHMS ARE BASED ON TWO MAIN MECHANISMS:

Mechanism 1: on-the-fly computation of trading envelopesThese trading boundaries are based on our recent continuation o the original work o Almgren and Chriss1 showing that it is possibleo build optimal trading curves or almost any benchmark2.Optimal highest and lowest execution rates are computed; such rates vary with time (Figure 1).

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P

ourcentage

10:04 10:26 10:28 11:09 11:31 11:52 12:14 12:36 12:57 13:19 13:40 14:02

Aggressive contributions to avoid

missing quantities

Stop contributing to avoid going too fast

Figure 1: The monitoring of a real order: the

trading curve is in red, the trading envelope in

dark blue, the market curve in light blue (as a

percentage, it can only be known at the end

of the trading period, but is plotted here as a

post-trade reference), and our execution curve

in black.


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LIQUIDITY SEEKER

CROSSFIRE p6

POUNCE p7HUNT p8-9

ICEBERG p10

M.O.C. p11

BENCHMARK

VWAP % VOLUME p14-15

SLIDING VOLUME % p16-17

IMPLEMENTATION SHORTFALL p18-19

TWAP

IN LINE p22-23

TARGET CLOSE p24

PAIR TRADING p25

TABLE OF

CONTENTS


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BUY 250,000 WEIR LN (WEIR GROUP) AT 995P.

WOULD BE INPUT ASBUY 250,000 WEIR LN CrossFire StartTime 09:25 End Time 16:15 Limit 995p

EXAMPLE

CrossFire

FACTSHEET

L

IQUIDITYSEEKER

6

STRATEGYDESCRIPTIONCrossFire is a liquidity-capturing algorithm that will allow you to take advantage o hidden liquidity within darkvenues.Its primary aim is to execute the order as quickly as possible, at the best available price, while minimisingmarket impact and inormation leakage. It does this by posting only in dark liquidity venues, while also provi-ding the option to sweep lit venues, when directed.

When posting at dark venues, the algorithm will analyse participation within the various venues that are pro-viding the most liquidity and reallocate orders to optimise perormance.

AVAILABLEPARAMETERSPERIOD (START-TIME & END-TIME)

- Used to speciy time period over which the order isworked.

LIMIT

- MANDATORY Used to put a price constraint on the order so that tradingonly occurs within this limit.

PRICE STRATEGY

- Midpoint.

QUANTITATIVEMODELCrossFire allows the trader to send an IOC at a marketable limit to multiple ATSs, or dark pools. This takesadvantage o any possible hidden liquidity in these new vehicles. Prior to entering the order, CrossFire allows the trader

to decide what to do with the balance o the order ollowing the initial IOCs. Options include repeatedly hitting the ATSswith IOCs, posting to ATSs, posting the balance to the smart order router (or another algorithm), or releasing the balanceback to the trader to work as he sees t. CrossFire also allows the trader to split part o the order to standard lit marketsto take advantage o all possible liquidity.


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EXAMPLE Buy 250,000 WYE, sweep aggressively when the price is avorable and get donein dark pools i possible.

WOULD BE INPUT ASBuy 250,000 WYE POUNCE Start Time 15:50 End time 16:00

Dark Pools YES Aggressive

PounceUS ONLY

FACTSHEET

L

IQUIDITYSEEKER

STRATEGYDESCRIPTIONPounce intelligently lls an order using a air price model.

AVAILABLE

PARAMETERSPERIOD (START-TIME & END-TIME)

- Used to speciy time period over which the order isworked .

LIMIT

- Used to put a price constraint on the order so that tradingonly occurs within this limit.

DARK POOLS

- Access dark pools.

URGENCY

- Urgency o the order. Choose between Normal orAggressive.

QUANTITATIVEMODEL

The Pounce strategy works an order by watching the tape and rapidly jumping on avorable price opportunities.Using a robust, short-term air price model, it determines when to hit or take, trying not to move the market unnecessarily.Pounce will interact with standard marketplaces, dark pools, or a combination o both.


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Buy 100,000 ACA, get whatever you can until New York opens without being inthe market, dont act i there are ewer than 500 shares on display and dont paymore than 31.30.

WOULD BE INPUT ASBuy 100,000 ACA HUNT Start-Time 9:00 LET End-Time: 15:30 LET Min Size 500 Limit 31.30

EXAMPLE

HUNTMULTI-VENUE MODE EUROPE ONLY

8

FACTSHEET

L

IQUIDITYSEEKER

STRATEGY DESCRIPTION

Systematically hits the specied price. In other words, it provides the possibility o entering a limited buyor sell order without being visible in the market. As soon asshares are oered/bid at the specied price, itshoots. This algorithm is particularly useul or illiquid stocks.

Now available in multi-venue mode:

I the ront-end execution execution venue eld is not populated, the algo will assume that you want to takeliquidity on every available venue. The order will then be worked accordingly

AVAILABLE PARAMETERSPERIOD (START-TIME & END-TIME)

-Used to speciy the execution period over which Hunt isto work.

LIMIT

- Used to speciy the price level at which Hunt should lit theoer/hit the bid.

MIN SIZE

- Used to speciy a minimum shooting size to avoid payingthe spread or small quantities and to allow the market torebuild sucient depth.

- I not lled, the Algo will use the stocks ATS.

QUANTITATIVE MODELThe algorithm works like a hidden sniper, constantly watching a specic bid/oer and entering Fill And Kill orders when thespecied Min Size appears, up to the specied level.I end time is past the close, the Hunt sends the amount not lled in the auction, as a strict order at limit price.


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HUNTMULTI-VENUE MODE

9

USER

GUIDE

L

IQUIDITYSEEKER

EXECUTION PROFILE

When the min size tradeis reached, get it done

Volume on the ar touch

Our trade

EXAMPLE

Hunt Buy Order is triggered with Limit 25.22& Minimum Size 500 Because o the minimum size at 500,the oer remains untouched

4 1 160 25.20 25.22 200 1

2 302 25.19 25.23 1 254 2

3 814 25.18 25.24 868 3

3 1 300 25.17 25.25 2 988 6

1 356 25.16 25.27 2 000 1

A sell order or 350 @ 25.21 arrives.Hunt wakes up as there is an opportunity to lit the oerat the required limit

4 1 160 25.20 25.21 350 1

2 302 25.19 25.22 200 1

3 814 25.18 25.23 1 254 2

3 1 300 25.17 25.24 868 3

1 356 25.16 25.25 2 988 6

In multi-venue mode, the order book in this examplewould be a consolidated order book o all available venues.

Hunt has bought 550 shares(200 @ 25.22 & 350 @ 25.21)

4 1 160 25.20 25.23 1 254 2

2 302 25.19 25.24 868 3

3 814 25.18 25.25 2 988 6

3 1 300 25.17 25.27 2 000 1

1 356 25.16 25.28 997 1

OUR RECOMMENDATIONSHUNT Algo is particularly suited or illiquid stocks

The trigger size is also critical or the set-up o the Algo:- I its too small, the HUNT will fre too oten and will be easily identifed- I its too wide, the HUNT will never fre, and will not take advantage o liquidity

and especially hidden orders


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Buy 100,000 ACA at 31.50 showing 5,000 at a time, good or the day.

WOULD BE INPUT AS

Buy 100,000 ACA ICEBERG Start-Time 9:00 LET End-Time: 17:30 LET Limit 31.30 Display Size 5,000

EXAMPLE

IcebergMULTI-VENUE MODE EUROPE ONLY

FACTSHEET

L

IQUIDITYSEEKER

10

STRATEGYDESCRIPTIONReproduces an Iceberg order, i.e. to show a smaller portion o the order to the market than the total ordersize. This strategy is useul or exchanges that dont support Iceberg orders.

Now available in multi-venue mode:

I the ront-end execution execution venue eld is not populated, the algo will assume that you want to takeliquidity on every available venue. The order will then be worked accordingly.

AVAILABLEPARAMETERSPERIOD (START-TIME & END-TIME)

- Used to speciy the execution period over which the Icebergis to be worked.

LIMIT

- Required to indicate the price at which orders should beplaced in the order book.

DISPLAY SIZE

- Used to speciy the size that has to be shown on the orderbook.

- I not lled, the algo will use the stocks ATS.

QUANTITATIVEMODELThe algorithm places a limit order with the dened price and quantity. Once this order is lled, the algorithm automaticallynters another slice with the same parameters as the rst, and so on until the order is completed.I end time is past the close, the Iceberg sends the amount not lled in the auction, as a strict order at limit price.

OUR RECOMMENDATIONS

The Iceberg strategy mimics

an Iceberg order- It is not exactly like a

market iceberg:

it works as a refll orderClassic Iceberg order:i possible, the entire

order is flled

Display size

Display size

Cheuvreux Iceberg Algo: when a slice is done,another slice is placed automatically.The priority rank may be lostThe price may also have changed

NB: I the market place supports Iceberg orders, a real Iceberg market order will be sent by the algo


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11

BUY 20,000 National Bank o Greece at limit 15 during the closing xing.

WOULD BE INPUT AS

Buy 20,000 ETE GA Market on Close LMT 15.00

EXAMPLE

M.O.C EUROPE ONLY

FACTSHEET

L

IQUIDITYSEEKER


Submits an at market or limit order (as directed) into the closing auction o the directed market. Orders canbe submitted at any point during the day and the algorithm is particularly useul or exchanges that do notaccept auction orders in advance o the close. The algorithm will work on the more than 20 markets whereAlgos are available.

AVAILABLE PARAMETERSLIMIT

- Required to indicate the limit price at which the order willbe placed in the order book.

QUANTITATIVE MODELThe algorithm waits or the time trigger to send the order with the dened price and quantity.

EXECUTION PROFILE

MOC places the order in theclosing auction

Price

Actual Traded Volume

Strategy Participation Rate


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Buy 100,000 ACA working rom when New York opens until the French market closes,try to match VWAP but limit the volume participation to 20% and i the price alls to 31.30, nish it.

WOULD BE INPUT ASBuy 100,000 ACA VWAP Start Time 15:30 LET End-Time: 17:30 LET

Max % Volume : 20

Would Level 31.30

EXAMPLE

VWAP ALL REGIONS

12

FACTSHEET

BENC

HMARK


Attempts to match the VWAP (Volume Weighted Average Price) over a dened time period.


- Used to speciy the execution period over which VWAPorder has to be worked (e.g. to avoid the opening/closingauction or start the order at a later time, etc.). An overthe-session order, by deault, will exclude the auctions.

LIMIT

- Used to speciy price constraints. In such a case the ordermay not be nished at the end o the period.

MAX % VOLUME

- Used to control Market Impact by limiting the volumeparticipation rate. In such a case the order may not benished at the end o the period.

WOULD LEVEL

- Used to enter a level at which the algorithm attempts tocomplete the order.

- I the order is lled at the Would Level, at the end o theperiod the VWAP may signicantly dier rom the reportedprice.

QUANTITATIVE MODELThe algorithm slices the order according to the historical volume-curve per stock. Volume curves are adjusted intra-dayin cases where signicant dierences between intra-day and historical volume-curves are detected. When a limit is used,should the stock trade within the limit price, the algorithm will work along its volume curve.

But i the stock trades outside the limit price, the algorithm will stop trading, waiting or the price to come back within thelimit. Upon returning to the limit, the algorithm will work the balance o the order in line with the volume curve or theremaining quantity. Limit-order placement is optimised to avoid paying too much o the spread, whilst trying to keep upwith the volume curve.


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VWAP

13

USER

GUIDE

BENC

HMARK

EXECUTION PROFILE

Changes in price and volumetraded have no eect on the strategy.

Price


Historical Volume Pattern


VOLUME CURVE CALCULATION

For liquid stocks (~600 European stocks), a volume curve is calculated or each stock, every night, based on the past 60days o trading (statistically optimised by our quant research team). The curve can be modifed at any time by the trader.

PARAMETERS IMPACT

END TIMEI the end time includes the fxing, a quantity (calculated in unction o the average quantity traded at fxing,

over the past 60 days) is sent to the market at fxing.

VOLUME DELAYIn case o volume delay (due to a limit), the delay can be treated in 2 dierent ways:

-Volume catch-up: the volume delay is caught up as soon as possible. This is the deault mode.Warning: this could create a resistance on which the stock can rebound.

-Volume re-sliced: the slices o volume are re-calculated, the volume to catch up is spread over the remainingslices. This smoothes the volume catch-up. To select this mode, the trader has to stop and restart the Algo.

Limit

Delayis taken

Volume catch-up. The volume can also

be spread on the remaining periods

Limit

For a buy order, i the price goes above

the Limit, the algo stops participating. In this case, thereis a risk that the order will not be nished

Price




OUR RECOMMENDATIONSVWAP Algo is particularly suited

in ollowing trading situations:

- Trader has no vision on the momentum(expected price variation)

- Trader wants to l imit market impact- Trader wants to be sure to fnish the order

RECOMMENDATIONSet up a max % volume limit to prevent market impact,

especially during low activity periods.

The Max % Volume caps the participation rate.I the parameter is set too tight, there is a riskthat the order will not be nished

Price





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Buy 100,000 ACA, participate at 33% o volume, but stop it at 15:00 i there is not enough liquidityto nish it beore, dont pay more than 31.30 and i the price alls to 31.15, nish it. Be aggressive.

WOULD BE INPUT ASBuy 100,000 ACA % VOLUME Start-Time 9:00 LET End Time: 15:00 LETMax % Volume: 33 Limit 31.30 Would 31.15 ExecStyle Aggressive

EXAMPLE

% Volume ALL REGIONS

FACTSHEET

BENC

HMARK

14

STRATEGYDESCRIPTIONExecution in line with prevailing volume at a target participation rate until the order is completed.

AVAILABLEPARAMETERS

PERIOD (START-TIME & END-TIME)End-Time is used to stop the order at a specic time i therehas not been enough liquidity to complete it at the targetparticipation rate.

LIMIT

Used to put a price constraint on the order so that tradingonly occurs within this limit.

MAX % VOLUME

Used to speciy the target participation rate.The algorithm automatically caps this eld at 50% o the volume. The 50% cap can be overridden manually withinCheuvreux upon request.

WOULD LEVELUsed to enter a level at which the algorithm attempts tocomplete the order.

EXECUTION STYLE

This parameter determines the trade-o between improvingthe execution price (placing instead o paying the spread)and adhering to the volume participation rate.Four levels are available : Very aggressive (adheres as closeas possible to the participation rate; more likely to pay thespread), Aggressive, Neutral, Passive (tries to improve theexecution price; more likely to be behind the participationrate; less likely to pay the spread.)

QUANTITATIVEMODELThe algorithm tracks the real-time market volume and tries to match the target participation rate. I the price does notmove, the algorithm places orders to avoid paying the spread unnecessarily. The algorithm dynamically calculates theexecution spread, i.e. the maximum discretion to pay the spread in order to catch up on volume.

When a stock is listed on multiple markets, the perormance will generally be better on the exchange where liquidity is

highest.


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% Volume

USER

GUIDE

BENC

HMARK

15

EXECUTION PROFILE

Time

Volume

Price

Changes in price haveNO eect on the strategy



PARAMETERS IMPACT

EXECUTION STYLEThis parameter xes the tolerance o the Algo with the target participation rate.The more aggressive it is, the more the Algo will cross the spread to get the volume at best opposite price.

Targetparticipation rate

Tolerance

PASSIVE

NEUTRAL

AGRESSIVE

VERY AGRESSIVE

No delay on the participation rate;the Algo has the ability to take some advance.

Spread is crossed more oten; risk to deteriorateprice perormance

Mostly used or relative small orders, on liquid stocksTry to capture the spread and obtain a good price; no pressureon the volume risk to be behind the participation rate

That tolerance is calculated as a unction o the stock, the average spread and the proximity with the limit. The spreadwe accept to pay i we are behind the volume (the Execution Spread) depends on the Execution Style:

WOULD LEVELFor a buy order, i the price alls below this limit,the Algo tries to nish the order

LIMITFor a buy order, i the price goes above this limit,the Algo stops participating

ExecSpread = AverageBidAskSpread * ExecutionStyleFactor

Calculated as the AverageBidAskSpread,on the period where the Algo has been late

Increases with the aggressivenesso the Execution style selected

Price

Actual Traded VolumeStrategy Participation Rate

OUR RECOMMENDATIONS

THE EXECUTION STYLEis modiable during theunctioning o the Algo.I the volatility increases,it is recommended topush the execution styleto a more aggressivestyle, to ollow theincrease o volume.

FAVOUR VOLUME

Unavourablemomentum

FAVOUR PRICE

Neutralmomentum

Favourablemomentum

Passiv

e

Passive

Neutra

l very

Aggres

sive

Aggres

sive

very

Aggres

sive

very

Aggre

ssiv

e

Pas

sive

Neutra

l

Aggres

siveNeutra

l

Aggres

sive

VERY GOOD PRICESIGNIFICANT RISK ON

VOLUME

VERY GOOD VOLUME TRACKINGSIGNIFICANT RISK ON PRICE


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Sliding Volume % EUROPE ONLY

Buy 100,000 ACA, participate at 33% o the volume or the current price, accelerate to 50% i theprice alls to 22.20, slow down to 10% i the price moves towards 22.80.

WOULD BE INPUT AS

Buy 100,00 ACA SVP Start time 9:00 LET End Time 15:00 LET Max % Volume 50.Re % volume 33 Min % vol. 10 Limit 22.80 Would 22.20 Re price 22.40

EXAMPLE

FACTSHEET

BENC

HMARK

16

STRATEGYDESCRIPTIONSVP (Sliding Volume Participation) automatically adjusts the targeted participation rate according to the priceuntil the order is completed.

AVAILABLE

PARAMETERSPERIOD (START-TIME & END-TIME)

- End-Time is used to stop the order at a specic time i therehas not been enough liquidity to complete it in the price range.

ORDER ENTRY PRICE

- It is the price o the target participation rate.

REF % VOLUME

- Used to speciy the target participation rate (at the money).

LIMIT PRICE

- Used to put a price constraint on the order so that theparticipation rate varies rom that limit towards the orderentry price.

WOULD LEVEL

- Used to put a price constraint on the order so that theparticipation rate varies rom that Would Level towardsthe order entry price.

- Min and Max %Volume can also be parametered.

QUANTITATIVE MODELThe algorithm tracks the real-time market volume and tries to match the participation rate which adjusts itsel accordingto price movements between the pre-dened Limit/Would price band.

EXECUTION PROFILE

Price

Order Entry price


Participation slows downas price rises above the orderentry price

Participation increases as price movein your avour

BUY ORDER


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Sliding Volume %

USER

GUIDE

BENC

HMARK

17

EXECUTION PROFILE

Deault values (min and max % volume) can be changed,or any customer requirement

In addition to the time parameters, 6 parametershave to be dened, to personalize the algo at yourconvenience:

PRICEPARAMETERS

Limit Price

Order Entry Price

Would Level

PARTICIPATION RATEPARAMETERS

Min %Volume (deault value 10%)

Re %Volume

Max %Volume (deault value 50%)

Price

COMMON CONFIGURATION:

Limit

Order EntryPrice

Would Level

Min% Volume

Targeted% Volume

Max% Volume

Participationrate

OTHER SUGGESTED CONFIGURATIONS

SVP can be parametered to unction in a large variety o ways:

Price

Participation rate

Constant participation rate out o the money Extra aggressiveness in the money

Participation rate

Price

Constant participation rate in the money Extra aggressiveness out o the money

Participation rate

Price

Low participation rate at the money Extra aggressiveness out and in the money

PARAMETERS IMPACT

For a buy order, i the price alls below this level, the Algo

tries to fnish the order

For a buy order, i the price goes above the limit,

the Algo stops participating

Would Level

Limit Price

Price

Order Entry price


OUR RECOMMENDATIONS

The limits are set too wide. No signifcant dierence in termo perormance between the SVP and the %Volume Algo

Price

Like all limited orders, limits must be re-adjusted in caseo price variation. Otherwise, the order may not be fnished.

Price

The SVP works as a meanreversion capture Algo

The parameters o the SVP Algo allow you to emulate an IS Algo, oering more sensibility to your own

constraints. It is perect to capture the mean reversion, in stable market conditions.


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Implementation ShortallALL REGIONS

Buy 100,000 ACA. Target the arrival price.

WOULD BE INPUT ASBuy 100,000 ACA IS

EXAMPLE

18

FACTSHEET

BENC

HMARK

STRATEGYDESCRIPTION

The main sources o uncertainty that have to be assessed to successully manage an implementationshortall strategy are the market risk and the price impact o the orders to be executed.Minimizing the possible negative eects o the market risk on the trades is already handled by VWAP andother low percentage o volume algorithms, perorming systematic and regular executions.Bringing price impact under control is very specic to implementation shortall algorithms. The algorithm mustbe able to quantiy the potential movements o the price caused by a given volume in a given stock at a givenhour o the day. Implementation Shortall (IS) automatically replicates the traders behaviour around market

impact and volatility risk and adjusts its participation rate accordingly, increasing it noticeably when the stocktrades in the money versus the Arrival Price. The algorithm is designed to require minimum input rom the user.


- End-Time is used to stop the order at a specic time ithere has not been enough liquidity to complete it in theprice range.

LIMIT


WOULD LEVEL


EXECUTION STYLE

- This parameter determines the curve o the execution proleand the trade-o between limiting the market impact andreducing the time to market by increasing the participationrate.

- Four levels are available: very aggressive, aggressive, neutraland passive ; the more aggressive, the quicker the strategywill be implemented and the volatility risk reduced. On theother hand, reducing the aggressiveness reduces thepotential market impact o the strategy while increasing thevolatility risk.

QUANTITATIVE MODELEach time the IS algorithm is used, it builds an on the fy nonparametric model o the price impact or the order. Based onhistorical data o the behavior o the price under similar conditions, this model computes a trading range in which the price islikely to stay during the trade.

The IS algorithm combines this trading range with other parameters to calibrate the

volume to deal at each price level, so that more volume will be traded when there is a

low probability to trade in a price impact zone, and less volume will be traded when

the probability o price impact is high. This combination o trading range and volume

to be executed lowers the probability o price impact.

Real-time indicators and historic reerences are computed and, when necessary,

trigger a re-determination o the trading range.

THE TRADING RANGE DEPENDS ON:

- The security (Volatility, mean spread, marketmicro-structure)

- The order (Size o the order compared tohistorical traded volume, time o arrival on themarket)

- The Execution Style


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Implementation Shortall

19

USER

GUIDE

BENC

HMARK

EXECUTION PROFILE

Participationincreases asprice moves in

your avour

Participation slowsdown as pricerises above theorder entry price

BUY ORDER

Price

Time

Tradingrange

2 and reassessesit when necessary

1 IS algo determinesthe trading range

Price

Trading Range


PARAMETERS IMPACT

ALL PARAMETERS ARE OPTIONALThe only input needed rom the user: Buy/Sell, Quantity, Stock

EXECUTION STYLE

The Execution Style will aect the unctioning o the strategy in two ways:

- Speed o strategy implementation.The more aggressive the style, the bigger the participation rate would be.The risk o market impact will be increased, but the order may be nished quicker.

- Management o the order book positioning o the various slices.

WOULD LEVELFor a buy order,i the price allsbelow this level, the Algo tries tonish the order

LIMITFor a buy order, i the pricegoes above the limit,the Algo stops participating

Would Level

Order Entry Price

Price


Limit Price

Order Entry Price

Price


OUR RECOMMENDATIONSThe IS strategy is used or orders that are benchmarked versus the Arrival Price.


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Buy 100,000 ACA during the next hour, dont pay more than 31.30 and i the price alls to 31.15,nish it.

WOULD BE INPUT ASBuy 100 000 ACA TWAP Start-Time 11:00 LET End-Time: 12:00 LET Limit 31.30

Would 31.15

EXAMPLE

TWAP ALL REGIONS

20

FACTSHEET

BENC

HMARK


Executes an order using time-linear slicing, i.e. worked in equal slices across the specied time rame.


- Used to speciy the execution period over which TWAP(Time-Weighted Average Price) is to be worked.

LIMIT

- Used to place price constraints on the order. In such acase the order may not be nished at the end o the period.

MAX % VOLUME

- Used to control Market Impact by limiting the volumeparticipation rate. In such a case the order may not benished at the end o the period.

WOULD LEVEL


- I the order is lled at the Would Level, at the end o theperiod the TWAP may signicantly dier rom the reportedprice.

QUANTITATIVE MODELSame model as the VWAP algorithm except that the volume curve is fat; thereore the order is sliced according to time (e.g.or an order that is to be worked over one hour, 25% will be completed ater 15 minutes).


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TWAP

21

USER

GUIDE

BENC

HMARK

EXECUTION PROFILE

Changes in price and volume traded haveNO eect on the strategy

Price



PARAMETERS IMPACT

END TIMEI the end time includes the fxing, a last slice is sent to the market at fxing.

Limit

LIMIT

For a buy order, i the price moves above the Limit,the algo stops participating. In this case, there is arisk that the order willnot be nished

COMPARISON TWAP/VWAP

I the price alls at the end o the day (buyorder), perormance will be better with a VWAP

Algo, as it over-weights the end o the day

Price



VOLUME DELAYWorks on the same principle as the VWAP Algo. I the order is behind the volume, due to a price limit,

then the Algo will try to catch up as soon as the price comes back to its limit, or a new curve can be calculated

to spread the balance o the order over the rest o the trading period; this would require trader intervention.

OUR RECOMMENDATIONS

I you are buying and you expect the price to rise

ater NY open, using TWAP will give you an average

price better than VWAP, as you will make more volume

beore NY opening than VWAP.

RECOMMENDATIONSet up a max % volume limit to prevent market impact,especially during low activity periods.

The Max % Volume caps theparticipation rate. I the parameteris set too tight, there is a risk thatthe order will not be nished

Price



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EXAMPLEBuy 100,000 ACA In Line.WOULD BE INPUT ASBuy 100,000 ACA In Line

In Line EUROPE ONLY

22

FACTSHEET

BENC

HMARK

STRATEGYDESCRIPTIONIn Line automatically replicates the traders behaviour around market impact and volatility risk and adjusts itsparticipation rate accordingly, increasing it noticeably when the stock trades in the money versus the ArrivalPrice.The algorithm is designed to require minimum input rom the user.


-End-Time is used to stop the order at a specic time ithere has not been enough liquidity to complete it in theprice range.

LIMIT


REF PRICE

- Used to enter a level at which the algorithm switches to axed participation rate.

WOULD LEVEL


EXECUTION STYLE

- This parameter determines the curve o the execution proleand the trade-o between limiting the market impact andreducing the time to market by increasing the participationrate.

- Four levels are available: very aggressive, aggressive, neu-tral and passive ; the more aggressive, the quicker thestrategy will be implemented and the volatility risk reduced.On the other hand, reducing the aggressiveness reducesthe potential market impact o the strategy while increasingthe volatility risk.

QUANTITATIVE MODELEach time the In Line algorithm is used, it builds an on the fy nonparametric model o the price impact or the order. Basedon historical data o the behavior o the price under similar conditions, this model computes a trading range in which the priceis likely to stay during the trade.

THE TRADING RANGE DEPENDS ON:

- The security (Volatility, mean spread, market micro-structure)- The order (Size o the order compared to historical traded volume, time o arrival on the market)- The Execution Style

Ater that submission phase, the trading range is not re-determined. The participation rate remains constant above the traderprice (buy order), and the Algo has a module that manages extra-aggressiveness on top o the determined volume participationrate when in the money (under the Re Price) (see next slide).


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In Line

23

USER

GUIDE

BENC

HMARK

EXECUTION PROFILE

The slopes o the execution prole depend upon the Execution style

BUY ORDER

Participation rate

Price

(aggressiveness)Extra aggressiveness in the moneyadded to the original slope

by liquidity sweep module

TraderPrice

Would

Re Price

PARAMETERS IMPACT

ALL PARAMETERS ARE OPTIONALThe only input needed rom the user: Buy/Sell, Quantity, Stock

EXECUTION STYLE

The Execution Style will aect the unctioning o the strategy in two ways:Speed o strategy implementation. The more aggressive the style, the bigger the participation rate would be. The risk o market

impact will be increased, but the order may be nished quicker.Management o the order book positioning o the various slices.

WOULD LEVELFor a buy order, i the price allsbelow this level, the Algo tries tonish the order

LIMITFor a buy order, i the price goesabove the limit, the Algo stopsparticipating

Would Level

Order Entry Price

Price


Limit Price

Order Entry Price

Price


Under the Re price, the Algo will sweep available liquidity at careully intervals, allowing the order book to restructurebeore ring.

OUR RECOMMENDATIONSThe In Line strategy is used or orders that are benchmarked versus the Arrival Price.


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EXAMPLEBuy 100,000 ACA. Target the closing price.

WOULD BE INPUT ASBuy 100,000 ACA Target Close

Target Close EUROPE & US ONLY

FACTSHEET

BENC

HMARK


The main sources o uncertainty that have to be assessed to successully manage an implementation shortallstrategy are the market risk and the price impact o the orders to be executed.Minimizing the possible negative eects o the market risk on the trades is already handled by VWAP andother low percentage o volume algorithms, perorming systematic and regular executions.Bringing price impact under control is very specic to implementation shortall algorithms. The algorithm mustbe able to quantiy the potential movements o the price caused by a given volume in a given stock at a givenhour o the day.The Target Close algorithm manages the market impact on the closing xing by optimising the start time othe order.The algorithm is designed to require minimum input rom the user.

AVAILABLE PARAMETERSLIMIT


CONTINUOUS %VOL

- Used to put a cap on the percentage o the volume incontinuous trading. The balance o the order will beexecuted at the xing.

AUCTION %VOL

- Algo will leave a maximum o that percentage o historicalauction volume. The deault is set up at 30%.

EXECUTION STYLE

- This parameter determines the prole o the executioncurve and the trade-o between limiting the market impactand reducing the time to market by increasing theparticipation rate at the closing xing.

- Four levels are available: very aggressive, aggressive, neutraland passive ; the more aggressive, the later the strategy will beimplemented and the volatility risk reduced. On the other hand,reducing the aggressiveness reduces the potential marketimpact o the strategy while increasing the volatility risk.

QUANTITATIVE MODEL

When Target Close receives an order, it determines theappropriate start time and execution curve to obtain an

average price as close as possible to the departure price.

Target Close algo determines the optimal start time o thestrategy, and the curve o execution, depending on theparameters o the order.

13:00

13:15

13:30

13:45

14:00

14:15

14:30

14:45

15:00

15:15

15:30

15:45

16:00

16:15

16:30

S1

S3

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0%

Percentage

done

24


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EXAMPLEBUY 100,000 FRANCE TELECOM

SELL 800,000 BRITISH TELECOMWHEN (FTE.PA / BT.L) < = 7.8574

Pair TradingEUROPE & US ONLY

FACTSHEET


CA Cheuvreux has a dedicated team o pairs traders to oer an ecient and proessional service. Our PairTrading solution continuously monitors the market prices or the securities involved in a Pair or Spread trade.The system will look to buy and sell the relevant equities when the client dened spread/ratio/premium ordiscount can be achieved. The Algorithm can be adjusted by using liquidity restraints to maximise volume orprice advantage, lowering impact and increasing the chances o successul trade completion. The systemcan take volume rom the Bid and Ask as well as the Hit/Lit levels.

AVAILABLE PARAMETERSLEG A AND LEG B

- Used to speciy the two stocks to trade against each other.

PAIR TYPE

- Used to speciy the type o pair: ratio, spread or premium pair.- Note that the system is able to trade cross-currency pairs with FX

hedging.

Trades can be weighted using share multipliers, cash amounts, FX levels or any combination o the three. The system is fexibleenough to cope with Risk/Merger Arbitrage pairs, Statistical Arbitrage and Long/Short trades in related securities. The algorithmemploys sophisticated leg management, allowing completion o one leg tranche rst depending on liquidity, or enabling a maxVolume % on the legs in order to minimise impact should it be required.

WITH THIS STRATEGY, ONE STOCK IS TRADED VERSUS ANOTHER,

DEPENDING ON YOUR CHOICE OF DIFFERENT PARAMETERS:

- Ratio pairs: the ratio between the two stocks (A / B)- Spread pairs: the spread between the two stocks (A - B)- Premium pairs: combining the ratio with a premium: ((A / B) + x)- Share multipliers and cash amounts can be incorporated into these basic calculations.

NB: Pairs Trading is not yet available via ront-ends: Please call Cheuvreux Pair Trading Desk in Paris (+33 1 41 89 77 77)or London (+44 207 621 5289)

QUANTITATIVE MODELThe traders use a system that they can ully parameter according to your needs. The system uses order book inormation andstate-o-the-art trading algorithms to monitor and automate the execution o pairs orders as much or as little as the trader

requires.

The algo looks beyond the bid and ask to accurately assess where it should be in the market, reducing your impact andimproving your execution, while leaving you in ull control o the degree o risk you take. When a pair reaches your level, thesystem reacts in milliseconds to place the right orders at the right levels to provide you with excellent executions.It also includes specic eatures to allow you to manage your oreign exchange exposure.

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This document is provided or general inormation purposes only and does not constitute a denitive and valid document having a contractual value, or beingconsidered as any supplement or amendment to a ormer agreement. This text is exclusively directed to Crdit Agricole Cheuvreuxs Eligible Counterpartiesand Proessional Clients or prospect. Services reerred herein are not available to Retail Clients. It is not to be construed as a solicitation or an oer to buy orsell any nancial instruments This inormation is prevailing as at the date o publication and is subject to change, without notice, to refect subsequentdevelopments. No liability is accepted by Crdit Agricole Cheuvreux that may arise rom any use o this material. This document and its contents are proprietaryto Crdit Agricole Cheuvreux, and no part o this document or its subject matter may be reproduced, disseminated or disclosed without the prior written

approval o Crdit Agricole Cheuvreux. The distribution o this document in other jurisdictions outside o EEA (European Economic Area) may be restricted bylaw, and persons into whose possession this document comes should inorm themselves about, and observe, any such restrictions.In the United States oAmerica, the oregoing inormation is solely intended or distribution to U.S. institutional investors and major U.S. institutional investors ("U.S. Clients"), as denedin Rule 15a-6 o the Securities Exchange Act o 1934. This inormation describes nancial products and strategies marketed by the Crdit Agricole CheuvreuxGroup including Crdit Agricole Cheuvreux S.A. ("CACSA") and other oreign aliates o Crdit Agricole Cheuvreux North America, Inc. ("CACNA"). CACNA,

www.cheuvreux.com - September 2011

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