execution quiz electronic, network, execution, principal

sabre

which method is most valuable for portfolio trade
A implementation shortfall
B VMAP
C principal trade
D electronic crossing network

onelife1

With a portfolio trade, you want liquidity and fast execution. If one of the stocks in the basket is illiquid, then you probably won’t be able to execute the portfolio trade. You also don’t want your trade seating there forever.
So I’ll go with C - Principal Trade.

tango_gs

goodman2011 Wrote:
——————————————————-
in the reading44
They are valuable from an opportunity cost standpoint against other algo strategies.
This question is taken far out of context comparing it to other methods.
EOC 18 uses ECN and Broker/Principal to trade a block order.
“The trader should use an implementation shortfall strategy to control the risk of this rebalance. In short, he should minimize explicit costs by waiting for trades to cross in an electronic crossing network, such as the POSIT trading system, but he should also submit names not likely to cross to a broker in order to minimize opportunity costs.”
I guess the answer is all of the above except for VWAP.

prav_Cfa7

in the reading44

jim8z3

goodman2011 Wrote:
——————————————————-
answer is A
Implementation shortfall strategies are typically
“front-loaded” in the sense of attempting to
exploit market liquidity early in the trading day.
Implementation shortfall strategies are especially
valuable for portfolio trades, in which control-
ling the risk of not executing the trade list is
critical. They are also useful in transition
management (handing over a portfolio to a new
portfolio manager), where multiperiod trading is
common and there is a need for formal risk
controls.
Where in book?
I would have never put that down. I never heard of using algo for basket trade. Must be on dealer side but I can’t even imagine.

Fdez

answer is A
Implementation shortfall strategies are typically “front-loaded” in the sense of attempting to exploit market liquidity early in the trading day. Implementation shortfall strategies are especially valuable for portfolio trades, in which control- ling the risk of not executing the trade list is critical. They are also useful in transition management (handing over a portfolio to a new portfolio manager), where multiperiod trading is common and there is a need for formal risk controls.

troymo

Electronic Communication Network is a type of crossing network.
You have two answers that work.
Again it comes down to quickness of completion.
Principal is the quickest but takes the biggest haircut. Crossing and Communications also handle portfolio baskets on an hourly basis.

hassan

ECN is not electronic crossing network

pimpineasy

C - i though principal for entire portfolios

bdavi77962

valuable is not the right word as it can have more than one meaning. Monetary value or valuable into complete them.
You can do entire baskets on ECN (I do them every day) or send them as a principal trade.
Execution speed is what matters.
Principal trade is going to create a lower monetary value based on the haircut but assurity of completion.
ECN is going to create a higher portfolio value in a flattish market but may take a couple of clearings to fully fill.