Introducing Next Generation Execution Algorithms

Zerodha Nest i3

Zerodha Nest i3 - Introduction

Zerodha Nest i3 is a comprehensive package with more than 13predefined sophisticated execution algorithms.

Nest i3 supports a multitude of order types and algos that can help limit risk, speed of execution, provide price improvement, allow privacy, time the market and simplify the trading process through advanced trading functions.

Dealers can choose from these wide variety of algorithms that suits their requirement to execute their orders with ease and in the most efficient manner.

Zerodha Nest i3 – Key Advantages

Limited Risk Speedy Execution

Price Improvement

Hide Large Orders

Zerodha Nest i3 – A package of 13 algos

Zerodha Nest i3 – Classification

Reduce Your Risk

Trailing Stops

Bracket

Aggressive Execution

Discretionary

Market/Limit if touched

Pegged to Market

Sweep to Fill

Better Average Price

Mid Point

Active Relative

Passive Relative

Scale

Automated Slicing

Iceberg

Time Slicing

Volume Participation

Zerodha Nest i3 – Strategies

Order Validities

Good for Day Good till Cancelled Good after time Good after dayImmediate or

Cancel

Zerodha Nest i3 - Iceberg

The Iceberg algorithm is suitable for trading large order quantities where duration is of no importance

Iceberg algorithm posts small orders into the market while holding the balance to optimize price and size of various orders while keeping in synch with each tick in the market.

Once the previous posted orders areexecuted they are replaced with the nextchunk of orders of the same size as that ofthe previous one.

Zerodha Nest i3 - Volume Based Participation

Volume based participation executes inline with prevailing volume at a targetparticipation rate until the order iscompleted.

The algorithm is used to trade up to theorder quantity using a rate of executionthat is in proportion to the actual volumetrading in the market.

If the trader wants to trade not more thanone third of the market volume, thenVolume based participation is the idealalgorithm to be used.

Zerodha Nest i3 - Time Based Order Slicing

Timer based order slicing algorithmexecutes an order using time linearslicing.

Timer based order slicing slices theorders in equal proportions acrossthe specified time frame.

Zerodha Nest i3 - Sweep-to-Fill

The algorithm is used to trade up to the orderquantity using a rate of execution that is inproportion to the actual volume trading in themarket.

The algorithm removes portions of liquidity as and when it is available in the market, i.e., it identifies the best price available in the market and the quantity available against that price and sends out the exact portion of the order for immediate execution.

Zerodha Nest i3 - Scale

Scale algorithm uses price, upper limit and lowerlimit specified to automatically scale large ordersinto smaller portions and send these as limitorders. Hence ensures that larger sized trades arenot subject to increasingly deteriorating prices.

The algorithm will slice the orders to be placedbased on the spread difference mentioned.

Once the quantity to be placed has been calculatedit will place all the orders as limit orders at once.

Zerodha Nest i3 – Trailing Stops

This algo allows you to set a trailing stop loss for every buy and sell order

You can define the trailing ticks as an input

The algo will continiously monitor and modifyyour stop orders as price changes.

Zerodha Nest i3 - Active Relative

Active Relative algorithm is used when the userseeks a more aggressive price than the best bid andoffer price.

The algorithm slices the orders based on timelinear slicing and while placing the orders thealgorithm will place more aggressive bids andoffers than the current best bids and offers.

The order price is automatically adjusted as themarket moves to keep the orders more aggressive.

Zerodha Nest i3 – Bracket

Bracket your orders with a profit leg and a stoploss leg

As soon as the main order is executed the systemwill place two more orders (profit taking and stoploss)

When one of the two orders (profit taking or stoploss) gets executed the other order will getcancelled automatically.

Zerodha Nest i3 - Passive Relative

Passive Relative algorithm is used when the userseeks a less aggressive price than the best bid andoffer price.

The algorithm slices the orders based on timelinear slicing and while placing the orders thealgorithm will keep these orders pegged to thebest bid for buy order or ask price for sell orderrespectively.

The order price is automatically adjusted as themarket moves to keep the order less aggressive.

Zerodha Nest i3 - Pegged to Market

The Pegged to Market algorithm is used to peg thelimit order price to the best available ask/bidprice.

This algorithm continuously modifies anunexecuted order’s limit price to the bestavailable ask/bid price until the order getsfilled.

Zerodha Nest i3 - Midpoint Match

Midpoint Match algorithm executes the orders at the midpoint price, i.e., the midpoint of the best bid and best ask price.

The algorithm slices the orders based ontime linear slicing and while placing theorders the algorithm will place theseorders at the midpoint price calculated.

Zerodha Nest i3 - Market-if-Touched

Market if Touched algorithm places buy/sell order above or below the market.

The algorithm holds the orders until thetrigger price is touched, only then thealgorithm will send out the orders as amarket order.

Zerodha Nest i3 - Limit-if-Touched

Limit if Touched algorithm places buy/sell order at a specified price or better, above or below the market.

The algorithm holds the orders until the triggerprice is touched, only then the algorithm will sendout the orders as a Limit order.

The algorithm will make sure that the orders areexecuted at the limit price mentioned or better.

Zerodha Nest i3 - Discretionary Order

Discretionary algorithm is used to increase the price rangewithin which the orders are eligible to execute. While placingthe orders a “discretionary percentage” needs to be specifiedbased on which the “discretionary price” is determined.

The algorithm then stands at the best bid/ask price with a pre-defined percentage of the order quantity. Whenever a price comes on the offer side/bid side which is within our discretionary price the algo will fetch the same.

Once all the quantity at bid/ask side gets filled, the next chunk for same size will go and stand as the best bid/best ask so on and so forth until all the quantities has been traded.

Zerodha Nest i3 – Algo Input Screen

Zerodha Nest i3 – Order Monitoring Screen

Zerodha Nest i3 – Array of algo control options

• Suspend

• Resume• View/Modify Parameters

Conclusion

Standard Execution

Nest i3 execution

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