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BMO Capital Markets - Quantitative Execution Services
Quantitative Execution Services
Time Weighted Average Price

Objective: To meet the time weighted price of the execution period.

The BMO Capital Markets ‘Time Slice’ or ‘TWAP’ (time weighted average price) trading algorithm allows a trader to break an order into multiple smaller orders to be traded over a given time frame. The underlying strategy for each of these smaller orders, or slices, is defined by the trader and can range from passive to aggressive. The size of the slices may be fixed or varied over the time.

Considerations and Risks

Trading Volumes and Depth of Market: The total trading volume of a given stock and the size of the Time Slice order must be considered when selecting this strategy. Like the VWAP strategy, the stock must have adequate volume and order depth to allow the trader to work the order into the market with minimal price impact on any one given trade.

Bid-Ask Spread: A Time Slice order is a short-time-period order placement strategy. The trader can control the aggressiveness of the order placement, in an attempt to capture the liquidity premium, however, it is likely that the liquidity premium will be paid at times. In a rising market, for example, a Buy order will pay the liquidity premium more times than not. The reverse is true for a Sell order. A fill from a Time Slice order should therefore be reviewed in this context.

Mitigating Actions: Price and volume limits may be set, as well as the aggressiveness.

Best For: The Time Slice algorithm is appropriate for liquid stocks with narrow bid-ask spreads, to be executed over a short time period.
Please contact Quantitative Execution Services (416) 359-5743 if you have any questions

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