The Gateway to Algorithmic and Automated Trading

The show must go on!

Published in Automated Trader Magazine Issue 17 Q2 2010

It was fun, actually, Trade Tech this year. More volcanic eruptions than usual, and perhaps fewer people than Paris 2009 – although the official count made it “the largest gathering of equities professionals in the ten-year history of TradeTech”. But a lot of connections were made, follow-up meetings arranged, and key issues addressed, both in the formal sessions and on the exhibition floor. Latency was the biggest issue discussed but not the only one: when we weren’t talking about those last few micro-seconds, we were discussing: effective data delivery and usage; smart- and smarter-order routing; best execution; market surveillance; post-trade economics; clearing – and whether we had enough room in the magazine for all those launches. Automated Trader’s Editor, William Essex, reviews the show that so nearly didn’t happen.

Credit to the organisers, WBR, for going ahead at all. There were moments, on day one (buy-side day) of Trade Tech 2010, as speakers and delegates phoned in last-minute apologies from faraway departure lounges, sessions were hastily reshuffled and queues continued not to build up at the registration desks, when the show felt more like Trade-can't-make-it Tech 2010. That unpronouncable volcano was still belching dangerous ash, and the skies above London's ExCel Centre (convenient for London City Airport, but - on that day - only if you wanted a quiet place to think) remained unmarked by vapour trails.

What volcano? We got here!

What volcano? We got here!

Desperate hours for the organisers, no doubt. But beneath the surface, there was business being done. The editorial inbox just kept on filling up with announcements, launches, opinions and invitations to visit stands, and in successive post-interview conversations with visitors to Automated Trader's on-site TV studio, we heard the same, consistent message: not so many people, but useful meetings, contacts to follow up, connections made. And there were many tales told of heroic journeys to the venue from aeronautically challenged corners of central and eastern Europe.

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Through it all, the show went on. Among the technical highlights: David Dungay, our Online Editor and all-round technical whizzkid, spent a happy half-hour at the Orange Business Services stand, playing with their new trading terminal, Open Trade, while John Howard, our CEO and all-round trading whizzkid, went head-to-screen with the University of Bristol's best trading robots in Professor Dave Cliff's Humans v Robots Trading Experiment (the robots won, but not by much; we had to remind John which side this magazine is on). More on Professor Cliff's work on page 5 and online - and we'll be returning to this subject in future, because the results of the experiment weren't quite as clear-cut as you might think.

And before we continue, what was it about Open Trade that our Mr Dungay liked so much? It's a neat piece of kit, for a start. Ergonomic, even. But apart from being easy to handle, it's also "the first intelligent trading communication platform". It was first developed as a personal trading assistant, but it grew up into "a revolutionary, innovative, touch screen multimedia, communications system … [providing] ... perfect communication channels that converge at a single point for information and conversations, seamlessly integrating voice, video, email, instant messaging and web-based applications." It also allows integration with CRM and other business applications as well as with most cloud-computing strategies. If you can keep your head together, it will also let you host "up to 30 simultaneous conversations and conference calls".

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We should get one for John Howard, and send him off to the University of Bristol's Department of Computer Science. Or come to think of it - perhaps not. Linedata Services announced another useful innovation: touch-screen functionality in the LongView trading order management system. LongView already incorporates three-dimensional graphics, live charts, transparency, and animation. David Hagen, global director of trading at Linedata, told us: "LongView optimised the trader interface. Opening up that interface to the possibilities of touchscreen trading was a small logical step, but it will be an exponential breakthrough in usability." Although you can still mouse-click if that's what you prefer to do.

Spreading Fidessa’s message

Spreading Fidessa's message

Non-technical highlights of the show included FTEN's decision to hone the commercial message down to an Alice in Wonderland metaphor: avoid rabbit holes (and other pitfalls). FTEN's stand was a design (and no doubt networking) triumph, and we were delighted to see that the show's "business smart" dress code was flexible enough to include floppy rabbit ears and drawn-on whiskers. That's us sorted for next year. Fidessa, meanwhile, were strategically placed on the shortest route to the morning coffee-and-buns area, and as Phil Slavin put it, directing us to the shortest queue, "Fidessa does everything!" Fidessa came up to the studio; they're busy with - well, everything. It's a fascinating interview; you'll find it online.

Perhaps the most dramatic announcement of the show - at least, the one that provoked most comment afterwards - came from Hirander Misra. He's now CEO, and co-founder with Alexei Lebedev, of ALGO Technologies. Hirander, a regular presence in these pages, chose Trade Tech as the moment to unveil "the fastest-ever exchange/MTF matching engine". With latency verified by CorvilNet measurement tools at "15 to 30 times faster than the current fastest" exchange/MTF platforms, the new trading system, Algo M2, "can therefore process 15 to 30 trades in the time it takes for the price to move once on other platforms". And if that doesn't emphasise the point enough, what Corvill actually verifies is "an external round-trip latency of just 16 microseconds measured from customers sending orders to receiving an acknowledgement or trades".

Hirander Misra, CEO, AlgoTechnologies If you cannot view this video then your Flash Plugin is out of date.
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There was a lot of comment about ALGO M2 at the show, and you'll find Hirander Misra interviewed at length at www.automatedtrader.net. We spoke to a number of people about the possibility - or not - of establishing a standard for latency (the question recurs in our TV coverage), but a commonly expressed view was that no, we're never going to establish a 'basis point' to use in the expression of latency. Perhaps, though, there might be some value in a degree of standardisation: for example, what are we measuring? Component? Round trip? Latency is elusive in another way - not just that there are too many incompatible factors determining latency, but also that it is in itself only one component of a wider mix.

Valerie Bannert-Thurner’s networking tea party

Valerie Bannert-Thurner's networking tea party

You can be as fast as you like, but if you're not trading on good information, you are, as the saying goes, toast. Thomson Reuters were also at the show, talking about Thomson Reuters Elektron, which is a global, ultra-high speed network and hosting environment that enables financial firms to access and share information "faster and more cost effectively". Hedge funds, asset managers, banks, brokerages, exchanges and other participants will, we're told, for the first time be able to connect to the world's largest financial community and securely reach trading partners over the network.

They'll be able to "trade faster, using the most complete coverage of real time financial information available". And it will happen "up to 20 times faster than traditional aggregated data networks".

There are wide-ranging interviews with Mike Powell, global head of enterprise information at Thomson Reuters, at www.automatedtrader.net. We took the opportunity to speak to Mike at the show, even though we'd already recorded an interview with him in March. There's always a lot to be said about data sourcing, delivery and management - not to mention the closely related but distinct area of financial/other news management. [Barry Johnson also delves into the complex challenge of effective news exploitation in his piece on page 20 - and in his book 'Algorithmic Trading and DMA: An introduction to direct access trading strategies', details of which appear at the end of his article.]

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Meanwhile, in another corner of the show, Progress Software launched their Progress Market Surveillance and Monitoring Solution Accelerator product, which "enables financial institutions, exchanges and market regulators to detect patterns of abusive or erroneous trading activity and take corrective action to prevent trading fraud and abuse in real-time," which is useful. Adam Honore, research director at Aite Group, gave us a view: "The regulatory talk right now focuses on throttling or dumbing down trading technology so regulatory agencies can keep up with the firms they are expected to monitor. Regulators should instead be pushing real-time monitoring and responsive technology both for themselves and the firms they govern to keep up with trading trends instead of trying to slow innovation."

Bradley Duke, Knight Capital describes Oasis algorithm If you cannot view this video then your Flash Plugin is out of date.
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Nicely put. Knight Capital were on hand at the show to discuss the launch of Oasis, their smart-order execution algorithm that sources small- and mid-cap liquidity for European equities. Oasis uses "innovative logic" to source liquidity in thin and difficult-to-trade names with increased efficiency and opportunities for price improvement as well as greater fulfilment. Bradley Duke, Managing Director at Knight, told us: "Knight does not subscribe to a one-size-fits-all approach. That philosophy has led Knight to become an innovator in creating new categories of algorithms, including situation-specific algorithms like Oasis. Higher volatility, reduced liquidity and wider spreads are just a few of the challenges associated with trading small- and mid-cap stocks."

Diana Chan of EuroCCP talks to William Essex on clearing and interoperability If you cannot view this video then your Flash Plugin is out of date.
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Oasis is, of course, a new addition to Knight's algorithmic suite for European equities. Sungard's Valdi, also launched at the show, is a whole new trading solutions suite. Valdi "provides global trade order management, integrated direct market access, compliance, liquidity solutions and hosted services". The idea is to provide traders with the ability to trade multiple asset classes, while reducing costs by integrating liquidity services, clearing and compliance solutions. The launch was part of the first phase of a global rollout, with SunGard simultaneously launching Valdi OMS in the Americas and Valdi-hosted smart order routing and liquidity solutions in Europe. Show news also featured a new release of SunGard's Front Arena solution for risk transparency and position control across multiple asset classes.

Moving on from trade to post-trade, we also spoke to Diana Chan, CEO of EuroCCP, about the clearer's new service offering central counterparty clearing of trades in US stocks and US exchange-traded funds (ETFs) to European trading firms - but that story's also in our news pages this month. You'll find an interview with Diana Chan up at our website. Worth taking a look. Just because you've got all your TCA sorted out, and you're coming to the end of the trade cycle, don't think you've exhausted all your opportunities for cost-efficiency and risk reduction. Clearing matters.

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