Richard Rosenblatt, president and chief executive officer of the brokerage firm that bears his name, agreed that clients are looking for customized algorithms.
"What our clients really seem to be asking for are algorithms customized to their specific needs, and they simply don't exist," Mr. Rosenblatt said in an e-mail. "We are designing our interactive algorithms to not only provide custom execution solutions but also to adapt to a particular trader's style."
Mr. Plunkett said: "We're starting to try and think more like a trader, but it's difficult to put all that into a model or into a rule. If a trader gets an order in the middle of the day, instinctively he'll look at the last sale, opening price, high of the day, low of the day and who's been in the stock. In a matter of seconds, his brain will digest all that information.
"We've been trying to focus more on emulating what a trader does when he gets a stock," he said, adding that Instinet's Cobra algorithm, launched Jan. 23, aims to do just that.
Cobra is an order management algorithm that attempts to capture liquidity in a stock without being detected. It does so by waiting until liquidity builds up, then executing a trade without eliminating the entire pool of liquidity.
At Credit Suisse, New York, Dan Mathisson, managing director and global head of the firm's advanced execution services unit, and his team have been focusing mostly on expanding the use and functionality of the firm's algorithms across the globe.
Currently, clients can trade in 23 different markets and settle trades in any currency. Mr. Mathisson said the firm hopes to expand to four more countries this year.
"More and more, we're seeing clients setting up trading operations in a handful of cities and wanting to be able to trade around the globe from one place," he said.
For Rosenblatt and ITG, flexibility is a key feature that traders want in this next generation of algorithms.
Joseph Gawronski, chief operating officer at Rosenblatt, said one problem with current algorithms is that the trader has little opportunity to alter how the order is handled if new information comes in during the trade.
"If you decide to change your mind because of new information and you take (the trade) out of the algorithm and then put it back in, everything gets muddled up," he said. "They're not designed to work that way. We're incorporating certain color you might have from other sources, whether it's the (trading) floor or wherever," into new algorithms.
Tony Huck, a managing director and co-head of sales and trading at ITG, said the firm is working to leverage its experience in pre-trade and post-trade transaction cost analysis to provide more robust algorithms.
ITG is working to give "traders tools that help them decide in pre-trade which algorithm or algorithms a trade should go to and, during execution, being able to move between them," Mr. Huck said. "Then, after the trade is done, (we are) looking at the post-trade (analysis) and using that feedback to loop back to the beginning when it comes to the next trade."