Reserve order information can be a powerful tool to create an alpha strategy — even in its aggregated summary form. Recent Exegy research shows that end-of-day data from our Signum trading signal, Liquidity Lamp, paired with machine learning, can deliver 4X better returns with 10X less risk than following the S&P 500.
Exegy has developed this alpha strategy to show the breadth of uses for our Liquidity Lamp signal, which identifies iceberg order volume on US exchanges. While Liquidity Lamp itself can be a vital tool in the moment to assist in liquidity-seeking and execution strategies, the data that the signal produces over time has other marketable uses.
The end-of-day Liquidity Lamp aggregated summary can help firms see where institutional investors are moving without having to wait weeks or months for required federal filings.
This information can inform so-called “alpha cloning” strategies, which are designed to follow the behavior of top asset managers without incurring their fees. But by adding machine learning, firms can move beyond pattern detection and analysis to actionable prediction.
Exegy’s Liquidity Lamp alpha strategy is a case in point.