Broker-provided algorithms are automated trading strategies offered by brokerage firms to their institutional clients for executing orders in financial markets, including crypto. These algorithms aim to optimize trade execution based on client-defined parameters and market conditions.
Mechanism
Clients transmit their order specifications to the broker’s system, which then utilizes its proprietary algorithms to interact with various exchanges and liquidity pools. These algorithms factor in price, volume, timing, and potential market impact to achieve the client’s execution objectives.
Methodology
Brokers develop these algorithms to enhance client execution quality, reduce transaction costs, and manage market risk associated with large orders. Clients select specific algorithms based on their trading strategy, liquidity requirements, and prevailing market dynamics, leveraging the broker’s infrastructure for sophisticated execution.
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