Source material is [here].

1. Introduction

1.1 Overview

• In the 1990s 50% of the flow was manual, on the trading floor with the other 50% being electronic
• In the 2000s algorithmic trading got started

1.2 What is an Algorithm?

How to categorize algorithms

Single-order vs. List-based

• For list-based algos all orders are considered “jointly”
• You may still submit a list of orders to a single-order algorithm
• single-order algorithms trade the orders simultaneously but independently

Order Over Time vs. Discrete Point in Time

• The latter is called a “smart router”
  • Primary function is to route an order to a venue. Still uses an algo
• Orders that are split over time is generally what is considered “algorithmic” trading
• Algorithms are usually measured against some benchmark

Categorizing Algos on approach to Working Orders over Time

Scheduled-Based:

• TWAP (Time-weighted Average Price)
• VWAP (Volume-weighted Average Price)