Smart Order Routing (SOR), the automated process of directing orders to the most appropriate trading venue to achieve the best possible execution – typically using algorithms to analyse multiple factors, such as price, liquidity, speed and likelihood of execution, across various exchanges and trading platforms – has been a feature of electronic markets in some shape or form since their introduction in the 1990’s. As the growth of multiple trading venues and exchanges led to increased market fragmentation, and as regulatory changes such as Reg NMS in the US and MiFID in Europe emphasised best execution practices, early SOR systems emerged to navigate fragmented markets and optimise order execution.
Since then, advancements in technology and execution algorithms have continually enhanced SOR capabilities. Smart Order Routing has become more sophisticated, utilising real-time data and advanced analytics to navigate dark pools and other non-displayed trading venues, and it is now used to access liquidity in equities, fixed income, FX, and exchange-traded derivatives (ETDs).
Looking ahead, SOR will continue to be driven by technological advancements, regulatory changes, and market demands across multiple asset classes, including crypto and digital assets. Today, machine learning and artificial intelligence are steadily being integrated to improve SOR performance through predictive analytics, adaptive learning, and dynamic strategy adjustments.
TradingTech Insight has compiled a list of the top Smart Order Routing technology providers to consider in 2024. This list is based on a combination of A-Team Group research with entries and voting by our readership of SOR solution providers in our recent TradingTech Insight Awards USA and TradingTech Insight Awards Europe.
LIST FastTrade
Winner of Best SOR application 2024 in our Trading Tech Insight Awards (Europe)
LIST’s programmable Smart Order Router is designed to deploy best execution algorithms across trading venues and asset classes. It analyses market data, order details, and costs in real-time, and on an order-by-order basis. The SOR efficiently performs a pre-trade transaction cost analysis, considering liquidity, broker fees, venue taxes, speed of execution, and settlement to drive the order routing process successfully. The venue ranking algorithm can be customised based on clients’ needs and priorities, using features such as pre-trade market impact evaluations, forecasts of book movements, or past trade statistics for optimal counterparty selection. Detailed reporting provides proof of the decision-making process.
https://www.list-group.com/list-fasttrade/
Overbond
Winner of Best SOR application 2024 in our Trading Tech Insight Awards (US)
Overbond is an AI quantitative analytics provider for institutional fixed income capital markets. Overbond provides data aggregation solutions and a comprehensive suite of AI algorithms for bond pricing, trade workflow automation, pre-trade signals and market monitoring. A key element of Overbond’s SOR is its ability to work alongside existing O/EMS platforms. Overbond’s COBI-Pricing LIVE uses three layers of interoperability to automate trading: it ingests and aggregates data from multiple sources, it integrates with the legacy systems on the desk, and it communicates with electronic trading venues.
Overbond collaborated with partners from both the buy-side and sell-side to create the new SOR system for buy-side fixed income traders, which features AI-enhanced routing logic and allocates trades across multiple electronic trading venues and counterparties, based on price and liquidity, to achieve the best execution while minimising trading costs. The aim is to maximise the likelihood of successful execution and provide traders with full visibility into how an order will be segmented.
Bloomberg
Bloomberg’s Direct Order Routing (DOR) solution enables you to integrate your in-house Smart Order Router with Bloomberg’s liquidity. DOR replicates the RFQ and Order protocols through the FIX interface, enabling traders to achieve new levels of operational efficiency, particularly for low-touch orders.
Broadridge Financial Solutions
Broadridge Trading and Connectivity Solutions provides advanced Smart Order Routing capabilities as part of its comprehensive suite of trading and investment management solutions. Recently, Broadridge has upgraded its capabilities to enhance performance via a new technology stack. This upgraded solution provides enhanced configuration and increased flexibility for algorithmic capabilities, providing access to a deeper liquidity and increased performance in execution. The SOR can be used with a variety of third-party or in-house data sets utilising popular vendor feeds or direct exchange connectivity for lower latency performance. The product can be used across a number of asset classes such as equities, derivatives and fixed income products.
Charles River Development (CRD)
Charles River Development (CRD), a subsidiary of State Street Corporation, offers advanced Smart Order Routing functionality within its comprehensive Investment Management Solution (IMS). The SOR system is seamlessly integrated with CRD’s algorithmic trading tools, enabling the use of complex trading strategies tailored to specific execution goals. Traders can customise execution strategies by setting parameters such as limit prices, time constraints, and preferred venues, ensuring orders are executed to meet strategic and compliance requirements. With connectivity to a broad array of trading venues, CRD’s SOR ensures access to the best available liquidity and pricing options. Additionally, the platform provides robust post-trade analytics and reporting, offering detailed insights into execution quality, market impact, and slippage, which help traders refine their strategies and improve outcomes.
FlexTrade
FlexSmart is a customisable global Smart Order Routing system, offering ultra-low latency, high throughput trading with comprehensive routing functionality and regulatory compliance. As an algorithmic execution engine, it can facilitate the implementation of a broad range of trading strategies across markets and assets, integrating seamlessly with global electronic systems. FlexSmart can simultaneously and sequentially route with strategies for non-displayed liquidity and posting. With a user-oriented interface, users can effortlessly monitor all market destinations.
Instinet
Instinet’s Smart Order Router is designed to optimise order execution across multiple trading venues through liquidity aggregation from exchanges, dark pools, and ATSs. It supports advanced algorithmic trading strategies like VWAP and TWAP, dynamically adjusting based on real-time market data. The SOR offers extensive customisation, allowing traders to set specific parameters for price, preferred venues, and execution priorities. With low latency, high-speed execution, and cross-asset support, including equities, options, and futures, it ensures efficient trading. Access to Instinet’s proprietary dark pools like BlockMatch, and integrated Transaction Cost Analysis (TCA) tools enhance execution quality. Additionally, robust compliance features and global connectivity provide a comprehensive solution for achieving optimal trade execution and regulatory adherence.
LSEG TORA
TORA’s rules-based Smart Order Routing capabilities allow clients to optimise their trade execution based on factors such as price, liquidity, speed, and market impact. By intelligently routing orders to the most suitable execution venue, TORA helps clients achieve better execution, reduce trading costs, and enhance overall trading performance.
The sophistication of TORA’s rules-based SOR lies in its granularity, which empowers traders to fine-tune their execution approach by defining rules based on factors such as trading strategy, venue, asset class, order size, market conditions, time of day, or various other criteria. TORA uses powerful, real-time transaction cost analysis (TCA), which helps determine which type of algo to use (VWAP, TWAP, volume participation, etc.), how long to track the market, algo parameters (such as slice size, slice quantity, number of child orders, etc.), and which liquidity types to use (e.g. lit venues, dark pools, etc.). This level of granularity allows traders to pro-actively respond to market dynamics, thereby improving the likelihood of optimal order execution.
A key facet of TORA’s rules-based SOR functionality its ability to rapidly adapt to market conditions and switch from one algorithm to another, either automatically or at the trader’s instigation. This ability to dynamically alter strategies, on-the-fly, ensures that order execution remains optimised, whatever the state of the market.
https://www.lseg.com/en/data-analytics/trading-solutions/multi-asset-trading/tora
MarketAxess
MarketAxess Adaptive Auto-X is a revolutionary fixed-income algo trading and SOR platform, powered by unique machine learning-based data signals, trained on market and proprietary MarketAxess data. Designed to determine the most efficient and effective execution pathway for orders, and react in real-time to changes in market conditions, Adaptive Auto-X is fully integrated into Open Trading, MarketAxess’ award-winning all-to-all network, and can route orders across a range of liquidity pools and protocols, including price making and taking via RFQ and the Live Markets order book. The routing technology is also able to connect to external liquidity pools in the future.
Offered as a suite of algos designed specifically for fixed income, including passive, aggressive and participation styles, clients can even customise algos while they are in progress. Although designed to be a no-touch solution with plug and play support for all major OMSs, a dedicated Adaptive Auto-X desktop app keeps traders in control by providing full transparency on the algo’s progress, allowing them to switch between fully automated or “trader-assist”.
https://www.marketaxess.com/trade/auto-execution
Quod Financial
Quod Financial’s Smart Order Router stands out as one of the best in capital markets due to its advanced multi-asset capabilities and integration of AI/ML for real-time decision making. Its highly customisable platform, with over 400 parameters, allows traders to adapt strategies on-the-fly, enhancing execution quality and minimising risk. The SOR’s ability to handle equities, derivatives, and FX, combined with its powerful best execution and TCA package, provides unparalleled performance insights. Quod’s web-based configuration ensures ease of use, enabling traders to deploy sophisticated strategies without the need for specialised quant teams. With over 14 years of experience, Quod Financial delivers robust risk controls and regulatory adherence, ensuring compliance and safety. Its intelligent behaviour and data-driven execution intelligence make it an indispensable tool in today’s fragmented and dynamic market environment.
https://www.quodfinancial.com/smart-order-routing-sor/
SmartTrade Technologies
smartTrade Technologies’ Smart Order Routing functionality optimises trade execution by intelligently directing orders according to best execution principles and total cost of trading analysis. Utilising real-time data and advanced AI algorithms, SOR evaluates multiple factors such as price, liquidity, and latency to ensure optimal trade execution. This dynamic approach reduces transaction costs and minimises market impact, benefiting both buy-side and sell-side institutions. A leading European bank recently deployed smartTrade’s SOR to enhance its FX trading operations, achieving a significant improvement in execution quality and operational efficiency. By continuously adapting to market conditions, smartTrade’s SOR provides a competitive edge in the low latency FX market.
Trading Technologies
Trading Technologies offers clients the ability to leverage Smart Order Routing across multiple asset classes via the TT platform‘s algorithmic offerings. TT’s Aggregator gives traders the ability to create a synthetic instrument composed of multiple contracts and trade them as a single instrument, with routing rules determining where orders are routed. Users can configure Aggregator to route orders to a primary exchange when pricing is equivalent across exchanges, or to a secondary exchange when that has a better price. It allows users to trade an instrument, e.g., 10-year cash Treasuries offered on multiple exchanges, and ensure best execution across venues, with liquidity from each exchange pooled to provide the best potential execution price. In futures with like or fungible contracts, Aggregator brings like contracts into a common interface and price stream.
https://www.tradingtechnologies.com/
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