Billions: Solving Taylor's liquidity challenge with Quantitative Trading

🧑🏽‍🎓To go deeper on all the concepts in this video join my course on Alternative Investing:

Financial concepts in this episode:
👉 Market liquidity
👉 Algorithmic trading (algo trading)
👉 Liquidity Risk
👉 Derivatives
👉 Trading volumes & Bid - Ask

TRANSCRIPT FROM JOE WALD
The marketplace today is highly fragmented and trades in. Very small size. So average trade size on an exchange is probably a hundred shares or less. And the average order size of an institution is, 10,000 shares

Electronic trading and algorithm trading is really the methodology in which institutional clients leverage their access to executing a trade. To put it simply institutions tends to need to buy or sell large amounts of stock.

When you've got a fragmented market where you've got multiple places where you can execute and you also have high-frequency trading trying to, get an edge based on what they're seeing in the marketplace. It becomes an incredible challenge for an institutional client to be able to execute their orders without signalling or creating a lot of market impact or creating information leakage.

Using different quantitative strategies or different benchmarks to be able to execute that in an efficient and positive way for that client to get a great outcome.

An institutional client that's looking to trade electronically to execute a large block it is leveraging a strategy. Depending on what they're looking to do potentially a liquidity sourcing strategy, that's going to, work the order based on a quantitative kind of, arrival price kind of strategy. It's also gonna look to see if there are any large blocks of liquidity that take place in some of the dark pools or some of the venues that are at midpoint.

So what would happen if Axe Capital was a client of Joe’s and was passing the order to his team?

Now we've got this order. We understand the client's objectives. They've chosen a strategy of ours that they're going to use and, it's our job to make sure that the strategy performs optimally and that, we're picking the right venues and the right order types and watching what's happening in the marketplace really closely to make sure that we're executing as best we can and ultimately delivering a great outcome for the client.

ABOUT THE BILLIONS SERIES
Emmy® and Golden Globe® winners Paul Giamatti and Damian Lewis star in a complex drama about power politics in the world of New York high finance. Shrewd, savvy U.S. Attorney Chuck Rhoades (Giamatti) and the brilliant, ambitious hedge fund king Bobby "Axe" Axelrod (Lewis) are on an explosive collision course, with each using all of his considerable smarts, power and influence to outmanoeuvre the other. The stakes are in the billions in this timely, provocative series.

ABOUT THIS CHANNEL
FintechOrama is a channel that helps you discover and understand the world of fintech and modern finance

#Billions #liquidity #riskmanagement

[jaywantjagtap]

Fix the music vol mate, its distracting. I like your content <3

[sedditguy]

Kudos on being so passionate to learn about finance even in face of criticism. I really admire it.

[InvestOrama]

Don't like the audio? Use captions!
RESULTS are you like the external experts and I need to lower the background music!
Expect more of that coming soon (i.e. more guests, less background music)

[Machireddy]

One strategy I have seen predominantly in my old company, is they create liquidity to pump it above 40(as in the video) day till 41, seeing massive volumes many enter trade that's when algo offloads in small bunches, and whenever price reaches 40 again it pumps with large volume of fake orders creating false push and dumps. It's not a single day job but happens over a period. Catch is they won't sell until sufficient volumes are present for the day above ur price. So sometimes u see recommendations on news suggesting to buy on fresh breakout, instead retail is stuck while institution is out. Good content by the way

[frankhu]

I really like how u actually got an algo trader on to discuss!

[rakeshwasnik]

I like your content. Please cut down on the background music or increase your voiceover volume

[wongzehang]

Finally i understand this scene! On that note, could you cover the natural gas scenario? That one where their systems got hacked?

[fychannel]

I just found this channel hehe. I love billions and finally I can relate everything in the show

[judyl.]

4:00 fragmentation is you need to look for liquidity in many places.
4:15 dark pools: facilitate block trading. ...

[parzivalcreations]

You are doing a great job here! Don't mind the haters! Keep it rolling.

[Flamemanjr]

Hey man love the videos and I want to know, when is the course going to be finished?

[mr.goldfarmer]

This is probably why there are so many predatory moves in the market. The number of false break outs or stop hunts is just effing STAGGERING. But even so if one takes a look at the volume spreads and internals, you can deduce what is happening. Just like the most recent false break out of the SP500, it was quite predictable.

[karenandrews]

Lol I knew it would have to be a private block trade at those volumes! Great video

[TheLizardmonkey]

I need the dummies’ dummies’ guide on all this.

[rockefeller]

Been waiting for the answer to this problem

[valeenoi]

As a non-trader or someone who's into QT or market much, I've always wondered how these big whales unload their large amount of shares. Like let's say I have $2 billion worth of crypto, or like Elon Musk needing to sell $10's of billions worth of Tesla stock. Obviously, they'll probably do it over a few weeks or a few months, but then on the third day, everyone would probably discover their shrinking position and take them to slaughter house. So in that case, what do you do? Find a few big whales, institutions, investment firms, etc. and sell them big blocks on lower price off the exchanges? What if they get a hint from each other that this is your goal and end up again taking you to slaughter house? Fragmentation and algorithmic trading (whatever that means) sort of intuitively makes sense, but what exactly is that AT anyway? Or one should ask, can you provide an example of it?

[andyr]

ive always wondered why more funds dont just buy puts ahead of liquidating a big position. they could literally make a ton especially if they do it on an expiration date like a friday afternoon. is there regulation against doing this? say you buy 41 puts expiring in a few hours and then put a limit of 39 on your sell order for the original position. dumping the stock all at once will for at least a few minutes increase your put position by probably 50- 200 percent, and you could put a limit order on that put position to get that spike up quickly. yes you will lose some on dumping your original position all at once but the premium spike on those puts will go bonkers. you could easily manipulate the market doing this and almost guarantee a big return. i actually guarantee ackman does this all the time after listening to him talk over the years and him pump and dump shit on tv all the time.

[HEEBHITLER]

We need more like this with huge amount and no liquidity to sell pairs and scrnes if you can find some and explain

[cap]

Hi, if I wanted to study this in Uni what course would best fit trading?

[binoyd]

Love your videos!! Can you share the name of song/music you use in your videos in the background?! I loved it in the Ben Kim video