Bullet point style notes interested, additional, execution, structure, anything

NakedPuts

I am making some short notes (mostly in bullet points). If people are interested I would post them here. Asking because most people probably have their own notes and might not need anything additional. Let me put one as sample.

Reading 44: Execution of Portfolio Decisions
? Market order has price uncertainty. Limit order has execution uncertainty.
? Market structure
o Quote driven (dealer market)-Traders transact with dealers.
o Order driven-Traders transact with other traders
a. Electronic crossing network: Typical trader is an institution. Orders are batched and crossed. Cost of trade is low. Identity is hidden. No price discovery and unfilled order book.
b. Auction Market: Traders put fourth their orders to compete against other orders for execution. Can be periodic or continuous. Provides price discovery.
c. Automated Auctions: Also known as electronic limit-order markets. E.g. ECN. Trade throughout the day and trades are executed on a set of rules. Counterparty is not known and provide price discovery.
o Brokered market-brokers act as traders agents to find counterparties.
o Hybrid market-Combination of the other 3
? Market characteristics-1. Liquidity 2. Transparency 3. Assurity of completion
? Difficult to calculate implementation shortfall if market is illiquid. Difficult to calculate implementation shortfall, VWAP and effective spread if market is not transparent.
? VWAP- Advantages: 1. Easily understood 2. Computationally simple 3. Can be applied quickly 4. Appropriate for comparing small trades in nontrending markets Disadvantage-1. Not informative for trades that dominate trading volume 2. Can be gamed 3. Does not evaluate delayed or unfilled orders 4. Does not account for market movement or trade volume
? Implementation shortfall- Advantages: 1. Managers can see cost of implementing ideas 2. Demonstrate the tradeoff between quick execution and market impact 3. Decomposes and identifies costs 4. Can be used in an optimizer to minimize trading costs and maximize performance 5. Not subject to gaming Disadvantage: 1. May be unfamiliar to traders 2. Required considerable data and analysis.
? Econometric models judge trade effectiveness by comparing actual trading cost to forecasted trading costs. It can assist in determining size of the trade.
? Types of traders
o Information motivated- Prefers less time and uses market order. Likes to hide information.
o Value motivated-Prefers less price and uses limit order
o Liquidity Motivated- Prefers less time and uses market order. Does not hide intention. Counterparty to information motivated traders.
o Passive- Prefers less price and uses limit order. Trades on crossing networks to reduce commissions, lower market impact, increase price certainty and eliminate bid ask spread..
? Trade tactics
o Liquidity at any cost- Quick certain execution. High costs and leakage. Information motivated.
o Costs are not important- Quick certain execution at market price. Loss of control of costs (market orders). Variety of motivation.
o Need trustworthy agent- Broker uses skill & time to obtain lower price. High commission & potential leakage. Not information.
o Advertise to draw liquidity- Market determined price. High admin costs & possible front running. Not Information.
o Low cost whatever the liquidity- Low trading costs. Uncertain timing of trade & possible trading into weakness. Passive and value.
? Algorithmic trading
o Logical participation- Simple: Trade with market flow. Types include VWAP [order broken up] , time weighted average[ trading spread evenly over time] and % of volume[order is traded 5-20% of normal trading volume]. Implementation shortfall strategies: Minimizes implementation shortfall. Trades earlier in the day.
o Opportunistic-Trade passively but increase trading when liquidity is present
o Specialized strategies-Passive and others.
? Use Implementation shortfall strategy for high urgency trades. Use logical participation strategies for low urgency trades. Use skilled broker or crossing system for trades of large volume and high spread.