Case study ยท Small Hedge Fund

Execution automation for illiquid small-cap equities

A small fund with patient capital needed a disciplined way to work into and out of infrequently traded equities without manually entering orders throughout the day.

Problem

Client need

A small fund with patient capital wished to take positions in small-cap equities that trade infrequently. Rather than manually enter orders throughout the day, he asked Talosian to help with his execution.

Constraints

Variable sizing, volume, and price limits

The order size, desired daily volume, and acceptable price ranges varied widely by company.

Solution

Selectable execution strategies

Talosian developed three execution strategies: joining bid/offer, working orders mid-market, and crossing bid-ask. The trader could select zero to many strategies for an equity, enter the desired maximum daily volumes, and min/max price. The strategy would then enter trades throughout the day and cease trading once volume limits were hit.

Technologies

IBKR Gateway, Java, AWS

We used our base Java application connecting to IBKR Gateway endpoint running on an Amazon Web Services EC2 virtual machine.

Result

Less order-book micromanagement

The fund trader was able to set his desired price range, direction, and daily volume in order to work into or out of positions without having to micromanage his order book.