How Talos Multi-Leg Algos Slash Execution Slippage for Basis Trades

Performance analysis of Talos Multi-Leg for basis trading

We analyzed actual BTC and ETH basis trades that were executed through the Talos Multi-Leg Opportunistic Passive algorithm over 60 days in March-April 2025.

In Table 1, we divided the results into 4 quantiles across the range of client-defined target spread (or expected P&L). For each quantile, we calculate the spread slippage as the difference between the actual P&L and expected P&L. Across the 4 groups, the spread slippage was tightly bound between 1.3 and 5.2 bps. 

Table 1: Talos Multi-Leg Slippage by Expected P&L Range

The observed trades were filtered to share the following parameters:

• Imbalance: $10K–$50K
• Timeout: 30 sec – 1 min
• Hedge Payup: 2–5 bps
• Notional: > $250K

Note that a positive expected P&L number (in bps) means the trader wants to “make at least this much” in spread terms, whereas a negative number means “don’t lose more than this much”. A positive spread slippage number means the outcome was worse that the expected spread; whereas a negative number means the outcome was better than expected. 

Talos vs. the alternative

Attempting to manually execute these same multi-leg basis trades can be operationally complex and typically result in inferior slippage. Several implementation and quantitative challenges make it difficult to match the results produced by Talos’s algos. In Table 2, we summarize these challenges against the solutions provided by the Talos Multi-Leg algo.

Table 2: Challenge of Manual Execution vs. Advantage of Talos’s Multi-Leg Algo

^{*Assuming a 10-15 bps per minute risk and being unhedged for roughly 2 minutes before manual intervention, the estimated daily risk is 5.6%. This calculation (10 bps/minute * sqrt(1440 minutes/day)) positions the risk level between approximate daily risks for ETH and BTC.}

When compounded, we estimate these inefficiencies can result in 17–54bps of total slippage, dramatically higher than execution through a Talos Multi-Leg algo.

Beyond hedging: Unlocking alpha capture

The implications of this analysis stretch far beyond the basis trade use case. In actual P&L terms, trades executed through Talos generated approximately 4 bps in earnings, when our clients set up the multi-leg spread trade with the expectation to make profit. It therefore comes as no surprise that we see clients setting up spread trades for the purpose of “alpha capture”, which expands the use case for Talos Multi-Leg algos beyond basis hedging and rebalancing.

With Talos, you can focus on what to trade, while we focus on optimizing how to trade.

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^{Disclaimer: Talos Global, Inc. and its affiliates (“Talos”) offer software-as-a-service products that provide connectivity tools for institutional clients. Talos does not provide clients with any pre-negotiated arrangements with liquidity providers or other parties. Clients are required to independently negotiate arrangements with liquidity providers and other parties bilaterally. Talos is not party to any of these arrangements. Services and venues may not be available in all jurisdictions. For information about which services are available in your jurisdiction, please reach out to your sales representative. Talos is not an investment advisor or broker/dealer. This document and information do not constitute an offer to buy or sell, or a promotion or recommendation of, any digital asset, security, derivative, commodity, financial instrument or product or trading strategy. This document and information are not intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. This document and its information are subject to change without notice. It is provided only for general informational, illustrative, and/or marketing purposes, or in connection with exploratory conversations with institutional investors and is not intended for retail clients. The information provided was obtained from sources believed to be reliable at the time of preparation, however Talos makes no representation as to its accuracy, suitability, non-infringement of third-party rights, or otherwise. Talos disclaims all liability, expenses, or costs arising from or connected with the information provided.}