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Domain distillation

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Thomas PIERRAIN edited this page Aug 19, 2014 · 8 revisions

The perfect place to keep an eye on what we learned during our SOR journey.

Types of SOR

  • We distinguish two kind of Smart Order Routing system:

  • Historical SOR: receives orders to be executed as inputs (from human Traders, Order Management Systems, Hedging Systems), and splits them into several limit orders on various execution venues to ensure their best execution (via order execution strategies)

  • Modern/Adaptive SOR: receives investment intentions (e.g. I want to sell all my apple stocks, but only if the price is above ...) as inputs, and translates them into orders that will be then executed through the best possible execution strategies. A Modern/Adaptive SOR must also provides audit trail for every execution in order to prove best execution if requested by the financial regulators (see. the MIFID directive).

  • Somehow, a SOR is like a broker (giving the illusion of a single execution venue to the investor(s), whatever the number of used execution venues.

Various concepts that we must not confused

  1. Investor's intentions / objectives
  2. Execution constraints
  3. Orders triggering conditions
  4. Execution strategy algorithms
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