Hybrid Hedger Tuning - Strategy Parameters

Parameters for the Execution Strategy of the trade once the rule has been triggered. The adjustments allow control over the:

• Strategy
• DTA Speed
• DTA Guide Slope
• Liquidity

Strategy

Dynamic Time Algorithm (DTA)

• The Dynamic Time Algorithm (DTA in short) is a time-bound liquidity-seeking algorithm which aims to disperse risk to FX markets uniformly during the execution period. DTA will try to seek liquidity passively, if passive execution fails to attract enough liquidity fast enough it will employ an aggressive liquidity-seeking algorithm. The spread the algorithm is willing to pay will increase proportionally with the amount the DTA order is behind its required execution curve.

Signal Adjusted DTA

• As part of the product we have a suite of predictive signals that are used for price prediction. We apply adaptive signal composition a method of composition using an online reinforcement learning and online recalibration to capture changes in market state.
• These are a key element of regulating the pace of DTAs i.e. slowing the placement of order execution down when the price will mature in your favour and increasing the risk clearance rate if it’s going to go against you.

Aggressive Hedger Dynamic Spread

• The Aggressive Hedger Dynamic Spread uses DTA to cut down on hedging costs by calculating the proportion of mean spread to pay in a given timeframe to remove risk. This is achieved by calculating how much liquidity it can attract per unit of time.

Passive Hedger

• Passive hedging is a risk mitigating strategy rather than intending to deliver returns, it will earn
  spreads.
• The passive hedger sends a price out to ECNs
• ECN automatically matches buy and sell orders meaning trades take place instantly, allowing us
  to quickly remove the risk from our own books to the market.
• The ability to trade passively on ECNs, enables brokers to become a liquidity provider rather
  than a liquidity consumer.
• When the Passive Hedger is unable to produce risk reducing trades, the Aggressive DTA hedger is
  used.

Aggressive Hedger Cannon

• The cannon hedger looks to remove the risk as fast as possible at market spread, this does not respect predicates however is limited by the Liquidity Max Spread in the strategy parameters.

DTA Speed

The DTA speed applies a predefined order speed to the rule and allows for modification to the scaling of the speed at which the algorithm sources liquidity at.

The speed at which the hedger sources liquidity is also configurable.

DTA Guide Slope

The guide slope increases the spread the hedger is willing to pay the longer the trade is held.

When shorten on surplus is enabled, if orders are filled ahead of schedule, the strategy will keep up momentum and shorten the overall execution period by continuing to place orders. It is particularly useful when Force Greedy Orders is enabled.

Liquidity

Limits the maximum spread the hedger is willing to pay to remove risk from the book based on a multiplier of the defaultClientPriceMarket base spreads

Force Greedy Orders enables the hybrid to consume as much liquidity as possible within the target spread. When this is disabled it will only place orders with enough liquidity to get the VaR back on track.