Credit Suisse said yesterday that it has launched algorithmic trading for Indonesian equities as a further step towards providing a comprehensive electronic trading capability in the country. This follows the bank's introduction of direct market access (DMA) to the Indonesian market in August 2008.
Credit Suisse is one of the leading foreign financial institutions in Indonesia, active in investment banking and investment management services. The introduction of algorithmic trading in Indonesia is part of a move by the bank to introduce electronic trading throughout global developed and emerging markets, meeting its clients' needs for better execution.
"In an advanced Asian markets like Japan, we now execute over 65% of our self-directed client flow electronically," said Hani Shalabi, head of advanced execution services (AES) sales for Asia.
Credit Suisse most recently introduced an algorithmic dealing facility to India in June. It also provides this same service for Asia-Pacific equities listed in Australia, Hong Kong, Japan, Korea, Malaysia, Singapore, Taiwan and Thailand. The addition of Indonesia gives Credit Suisse clients trading in this market "an edge", said Shalabi.
"The technology is tuned specifically for Indonesia's market structure to maximise liquidity and minimise the impact of clients' trades. It's another step forward in our ongoing drive to deliver best execution to clients wherever they are trading," he added.
Credit Suisse's algorithmic platform records a vast amount of stock specific history, such as optimum dealing times, volumes and available liquidity, and adjusts to the idiosyncrasies of each market.
"Dozens of variables are incorporated, and they need to be adapted to the micro-structures of Asian markets. Strategies also have to be dynamic based on the characteristics of individual securities," said Shalabi. "In Indonesia, for instance, bid-offer spreads are very wide -- on average 80 basis points but (they can be) as high as 300bp -- so strategies that have 'spread hunting' built into their logic can significantly improve performance versus simply crossing the spread to get done," he added.
Algorithms have become increasingly popular globally as they enable investors to trade more efficiently, reduce transaction costs and minimise the market impact of their trades. The AES suite of algorithms makes available 12 headline strategies and more than 100 customised strategies within the region.
These include traditional algorithms that seek to: divide trading volumes over time; trade at the volume-weighted average price of a stock; and minimise implementation shortfall -- that is the difference between the price at which a client decides to trade and the actual execution cost. They also include strategies that aim to trade a certain percentage of a stock's daily volume.