Algorithmic Trading Methods, 2nd Edition

Chapter 16: Decoding and Reverse Engineering Broker Models with Machine Learning Techniques

Introduction

In this chapter we show how to decode and reverse engineer broker-dealer models. As has been stated previously throughout the book, brokers and vendors consider their market impact and transaction cost analysis models to be highly proprietary. They do not provide investors with any insight into the formulation or mathematical equations of these models, nor do they provide investors with any statistical performance tests. Furthermore, these brokers and vendors do not provide investors with functionality to allow investors to run their models and perform analyses on their own desktops and computer systems independent of the broker connections. ...