Example Investigations - Identifying Accounts Using Latency Arbitrage Strategies

The yield profiles and histograms can be used to identify adverse client trading behaviour.

Latency arbitrage is characteristic of flow turning negative soon after inception, therefore looking at the negative trades around shorter time periods such as 0ms, 100ms and 500ms will help to identify accounts taking advantage of adverse trading strategies:

Filter for negative trades at the selected time period:

This will return only the trades that are negative at 100ms, when grouped by counterparty as above, this will aggregate all trades from each counterparty that are negatively yielding at 100ms, discounting any underlying positive trades.

• Ordering by quantity will show the counterparty with the biggest volume offside

• Ordering by trade count will identify counterparties who are most frequently accessing offside fills.

Filtering by the identified counterparties and using Echo's groupings, you are then able to dig down into the source of toxic flow to understand whether the source of offside fills came from a particular parameter, for example instrument or timezone.