IS Zero reinvents VWAP to minimize implementation shortfall
Learn more

BestEx Research Launches IS Zero, Reinventing VWAP Algorithms for Low-Urgency Trading

January 24, 2024

STAMFORD, Conn., Jan. 24, 2024 /PRNewswire/ -- BestEx Research Group LLC, a pioneer in high-performance algorithmic trading solutions, proudly announces the launch of IS Zero. This innovative algorithm marks a significant advancement in the landscape of algorithmic trading, offering a more effective alternative to the long-standing volume-weighted average price (VWAP) algorithm for minimizing implementation shortfall (IS).

Asset managers traditionally segregate trades into low-urgency and high-urgency, aiming to minimize the IS costs associated with each group. For decades, low-urgency orders have predominantly relied on VWAP algorithms for execution, which are tailored to track the market's average price rather than minimize IS. This misalignment of the goals of the trader and algorithm often leads to suboptimal trading and inflated execution costs. IS Zero is meticulously engineered to address this disconnect, more effectively minimizing IS than VWAP for low-urgency orders.

Like a VWAP algorithm, IS Zero trades on a schedule and does not seek to expedite order execution. However, it introduces key optimizations to better align with its primary goal of minimizing IS. Enhancements include adopting a trade plan that minimizes market impact as opposed to a volume profile, implementing dynamic flexibility in following the schedule based on the liquidity of the stock, and providing liquidity in Alternative Trading Systems (ATSs) in addition to exchanges.

Hitesh Mittal, Founder and CEO of BestEx Research, explains the motivation for developing IS Zero: "A significant number of our VWAP clients prioritize arrival price performance, noting that conventional IS and liquidity-seeking algorithms can create unnecessary market impact when urgency is low. Traders need a solution that neither traditional IS algorithms nor VWAP provide. IS Zero is our answer, specifically engineered to address VWAP's limitations in minimizing IS."

Mittal adds, "We've rigorously tested each of IS Zero's enhancements in randomized, controlled A/B testing including more than $20B in executions, and the results consistently demonstrate IS Zero's superior ability to reduce IS over VWAP."

This announcement follows the launch of the Adaptive Optimal framework last year, which empowers BestEx Research and its customers to build tailored liquidity-seeking algorithms. BestEx Research customers now have access to differentiated solutions for liquidity-seeking with Adaptive Optimal and minimizing Implementation Shortfall for low-urgency orders with IS Zero.

Discover IS Zero: For in-depth coverage of IS Zero's design features and performance statistics, access the white paper at BestEx Research Insights. BestEx Research customers are empowered to run A/B tests comparing IS Zero to VWAP with Strategy Studio, part of its award-winning Algorithm Management System (AMS).