The Pairs strategy is built on the same platform that hosts Bank of America Merrill Lynch’s other algorithmic trading strategies.
As such the Pairs strategy is able to take full advantage of the company’s intelligent liquidity seeking smart order router (SOR), low latency infrastructure, and also access to internal liquidity, said Bank of America Merrill Lynch.
Ashok Krishnan, head of EMEA Execution Services, at Bank of America Merrill Lynch, said the strategy has been developed in close partnership with their own traders; giving them the knowledge and confidence that it will meet clients’ needs.
A Pairs trade is a combination of a buy and a sell order designed to execute when a user specified relationship between prices holds true.
Orders are executed in such a manner as to ensure consistent execution of both the buy and sell orders. The price relationship is generally expressed in terms of a ratio or a spread.
There are usually multipliers or offsets to be considered, hence the Pairs trading instructions are usually expressed in terms of a formula.
