Research On Institutional Investment Strategy Based On Algorithmic Transaction

In the United States, algorithmic trading has become the mainstream of the fund industry trading strategies. China algorithmic trading is still in the bud, some financial trading software provider and financial investment institutions are trying to enter this field. Some companies have developed their own algorithm trading platform, but due to various reasons, not for a wide range of promotion and use. Most Chinese institutional investors use the traditional system, which not join algorithm layer. The fund manager, instruct traders artificial order execution. The implementation process is limited to the market volatility、sensitivity of the real-time data and timeliness. When the market has changed direction, the strategy is always lagging behind the market, Such system can’t timely tracing the history of market information and dynamic real-time information.So they can not get accurately and quickly analysis and correct order.Based on the shortcomings, this paper put algorithm layer solution into the transaction layer and data layer. Joining algorithm in the transaction layer and data layer is the innovation of this paper, which is breaking the traditional mode of artificial place an order. Place an added algorithm in the order, will greatly improve the efficiency and reduce the cost of impact. In addition, algorithm of transactions are mostly limited to the simple VWAP algorithm. In this paper, we also research the market performance of IS algorithm. This algorithm makes this article more complete by reflecting the algorithm to reduce the cost. Such transaction is also popular in Europe and the United States market. And we compare the advantages and disadvantages of VWAP and IS algorithms. Finally, this paper also joined the algorithmic trading main body and to test its impact on the market. We call for more attention to the impact on the market the algorithmic trading make. The main conclusions in this paper are the following two points:Comparing the market with algorithmic traders with the market without algorithmic traders, this paper finds that algorithmic trading is indeed able to reduce the transaction cost and control the trading risk for the investors in the stock market. VWAP algorithmic not only reduces the average transaction cost of the institutional investors, but also ensures a more stable market(the standard deviation of the cost is much smaller). IS algorithmic can also reduce the transaction cost for the investors and help the investors obtain more. Although IS algorithm ensures institutional investors to complete transactions faster and earlier, it is less effective than VWAP algorithm. Algorithm trading can also lower the volatility of the stock market by reducing the shock of large orders on the market.And the limit orders generated by algorithmic trading will bring better liquidity, which is updated real timely. It shows that algorithmic trading plays an active role in improving the quality of the stock market.