Mastering Multi-Leg Algos: Advanced Execution Strategies in Crypto Markets

As crypto markets evolve with increasing sophistication, traders are seeking execution strategies that can keep up with complexity, liquidity fragmentation, and volatility. Talos is addressing this demand with advanced multi-leg algos—purpose-built tools for institutional trading desks navigating nuanced crypto trades.

In a recent webinar, Zheng Phan, Head of Technical Product, and Neelabh Dixit, Head of Product Strategy at Talos, took attendees on a deep dive into these powerful execution strategies. Here’s a replay and everything you need to know.

Why Multi-Leg Algos Matter in Crypto

Zheng kicked off the session by framing the core problem: crypto trading is fast, volatile, and fragmented across venues. Execution efficiency isn’t just helpful—it’s mission-critical.

• “Execution efficiency is the difference between edge and exposure.”

Multi-leg algos are designed to address slippage, latency, and market-impact challenges by coordinating multiple instrument legs in real time—minimizing risk while pursuing alpha.

Most Common Use Cases for Multi-Leg Algos

Neelabh focused on linear instruments, skipping options for this session (those will be covered separately). Use cases included:

1. Cross-venue arbitrage. Simultaneous long/short positions on the same asset across two venues to capture pricing inefficiencies.
2. Correlation-based pair trades. Long/short trades on two highly correlated coins when they diverge temporarily—targeting reversion to the mean.
3. Two-hop synthetic liquidity. Improve execution by trading via more liquid pairs, rather than relying on thinly traded direct pairs. For example, it enables quoting in non-USD fiat by composing synthetic paths (e.g., BTC-JPY using BTC-USD + USD-JPY).
4. Cash-and-carry (basis) trades. Capture premium/discount between spot and futures by trading offsetting positions.
5. Client facilitation (market making). Hedge client trades using the most liquid or cost-effective derivatives (e.g., futures or perps) to enhance quote competitiveness.
6. Delta-neutral staking. Generate yield on capital via staking while delta-hedging the spot exposure with perps, capturing both staking yields and funding premium cash flows.

Choosing the Right Algo

Zheng demonstrated how to configure and deploy strategies using the Talos platform. Three primary strategies were highlighted:

TWAP (Time-Weighted Average Price) 

• Best for passive execution over time
• Maker focused, schedule based, crosses only when behind schedule or leg imbalance grows
• Ideal when spread is steady and liquidity is deep

Aggressive 

• Best for traders willing to give the algo time for better execution, without leg risk
• Willing to absorb slippage relative to target spread to maintain flat leg risk
• Ideal when the priority is minimizing leg risk over slippage

Opportunistic Passive 

• Best for traders willing to take leg risk and allow time for better execution
• Maker on initiating leg, configurable hedge passive fill timeout, delta imbalance thresholds and “pay extra” settings
• Ideal when market favors patience, but trader wants fallback aggression rules

Key Algo Parameters Explained

Neelabh outlined critical parameters that shape execution outcomes:

• Initiating leg: typically the less liquid or lower-fee instrument (in some cases).
• Limit price: a target spread, not a firm limit, used to guide execution within bounds
• Max Imbalance: the maximum allowed notional difference between legs.

The following parameters apply to the Opportunistic strategy:

• Passive Timeout: time the algo tries to hedge passively before switching to aggressive hedging.
• Hedge Pay Extra: additional slippage tolerated to flatten leg risk once both passive hedging time and delta risk limits are breached.
• Market Hedge Trigger: optional parameter that triggers hedging via market order. Traders typically set it based on P&L limits, their view of the underlying’s implied volatility over the holding period, and slippage tolerance.
  

• “These tools are only effective when traders bring a clear view on market structure and leg-level risk tolerance.”

Latency: An Execution Edge

Zheng also emphasized the importance of latency—especially when spreads are thin and opportunities fleeting. Talos offers flexible infrastructure strategies—including co-location and venue-proximate deployment—and will soon launch a new low-latency connectivity solution to further improve reliability and execution speed.

Matching Strategy Selection to Trader Intent

There’s no single “best” setup. Traders must decide based on multiple factors including:

• Liquidity of individual legs
• Spread volatility
• Risk appetite (time and imbalance)
• Venue capabilities and fee structures
  
  
• “Two traders on the same desk might run different algos—or use the same one with completely different parameters.”

Final Thoughts

The webinar highlighted just how flexible—and powerful—multi-leg algos can be for institutional crypto traders. Whether arbitraging across venues, managing complex hedges, or optimizing staking returns, Talos’s multi-leg tools empower institutions to execute confidently, efficiently, and at scale.

Want to learn more? Reach out to your Talos account manager or email sales@talos.com for a personalized walkthrough.