Insights & Commentary

Market Structure

Cowen Market Structure: The Value of the Block

Sep 6 2017

Desk commentary by Jennifer Hadiaris

The Value of the Block

Based on an analysis of conditional orders in Cowen’s algorithmic trading strategies, we estimate the value of an average block execution is at least 6 basis points, and can be significantly higher in less liquid securities.

Earlier this year Cowen added access to conditional liquidity in our algos and created a new algo called Block SEEK specifically built to leverage conditional order types and capture large block fills. In this follow-up piece we highlight some key metrics around conditional liquidity, and why we think Cowen algos are able to capture unique and meaningful liquidity.  We also look at trading statistics since implementing conditional orders into our algos, and try and answer the age-old question of what is the value of the block liquidity?
Key Points

  • Cowen algos have been able to capture large blocks using conditional orders, with an average fill size of 29,000 shares. Conditional liquidity is extremely valuable for traders looking to execute larger orders, which seems to have become more and more challenging in the incredibly fragmented US equity landscape.
    • Conditional liquidity captured via Cowen algos has been over 100 times the average trade size on exchanges and ATSs and over 5 times the average display size.
    • The average notional value of conditional fills is around $2,000,000.
  • Cowen’s conditional fills frequently rank in the top 10 trades of the day, as we capture truly unique liquidity which meaningfully reduces timing risk.
  • The estimated value of the block captured using Cowen algos is at least 6bps, on a ~29,000 share block.
  • Cowen algos capture a large portion of conditional liquidity in the first hour after the open.


Click here for the full report