Bloomberg Tradebook has launched a new "soft limits" feature for its algorithms that is aimed at increasing liquidity capture. This new feature enables many portfolio managers' instructions to be consistent with how the algorithm works, according to a release.

Most algorithms work off the idea of a hard limit - a limit price that no execution can violate - rather than an average price limit. Therefore, if a trader has a hard limit of $9.25 and he or she buys stock at $9.00, the hard limit prevents executions above $9.40 even though with the $9.40 execution the combined average price on the total order may be below the $9.25 limit.

Many portfolio managers want to own their "position" - or the average price of the whole order - below a certain price. The new "soft limits" feature enables traders to move their limit from the execution level to that average price level, giving the algorithm more opportunities to capture more liquidity and still meet the portfolio manager's instructions.

Soft limits are available for both U.S. and Global stocks.