We’ve published a new trading research note “On the Limits of Markouts and Venue Curation” which highlights the challenges venues have in the use of markout to evaluate execution quality as they simply do not know the context or have enough information to truly measure the opportunity cost of not trading. We also demonstrate that markout is not just a characteristic of the venue or its order type logic, rather it is a characteristic of the algorithmic logic. This is illustrated through the comparison of trading data from two different Pragma algorithms, an AI-based VWAP algorithm, Mercury, and our high performing standard VWAP algorithm, which shows notably different markouts for the same venues between the two algorithms under comparable flow. The question then of which venue and order type an algorithm should use varies based on stock characteristics, the specific trading objectives of the order and the real-time dynamics of what is happening in the market.

We hope you enjoy our new note and email us at researchnotes@pragmatrading.com with any questions/comments.