The Gateway to Algorithmic and Automated Trading

demo-Quant-isation

Published in Automated Trader Magazine Issue 35 Winter 2015

HFT democratisation was a big buzz-phrase a few years ago, and today high frequency technology is spreading across asset classes and geographies, and from signal generating algos to execution. meanwhile, there's talk that quantitative trading is next in line to be "democratised" and people are wondering whether there are any lessons to learn from the HFT experience. Anna Reitman reports.

Rick Lane, CEO, Trading Technologies

If there is a sign that HFT has hit the mainstream, it's that the CEO of Trading Technologies, Rick Lane, is getting phone calls from his worried grandmother, asking if he's mixing with the wrong crowd.

After a brief stint at Google, Lane returned to Trading Technologies earlier this year to lead development of the firm's next generation trading platform. And though he is optimistic about the level to which low latency technologies have become accessible, Lane recognises that mass availability means regulatory oversight.

"This type of technology becoming more accessible and more available to the masses, you bring with that greater scrutiny," he said. "It is the same reason why my grandmother asks me if I read about 'the flash boys',

"That she is talking about HFT is shocking because two years ago that type of story would never have crossed her CNN channel."

For Lane, democratisation means that sophisticated technology is available to everyone, allowing everyone to operate on the same playing field. So a small floor trader who doesn't have an army of engineers on staff can compete in the low latency programming space with the large proprietary trading firms.

He entered the business almost a decade ago at a small prop firm as an engineer, later co-founding tech supplier, Tickit Trading Systems, from that experience.

"I worked with a bunch of traders who didn't know much about software engineering. Things would happen in the market in the middle of the day that they wanted to capitalise on and these were often very fleeting opportunities," he said. "Managing expectations on how long it actually takes to write code, make sure it is bug free and that we are all comfortable before we turn them on into production - it was just a tough environment."

Lane was part of a team that developed a platform focused on making the engineer obsolete, resulting in a kind of visual drag and drop method of constructing trading strategies. From there, a commercial platform was launched based on the technology - Algo Design Lab.

Years later, he still holds an idealistic technologist's view on the state of the market.

"Cost of acquisition is precipitously falling year after year, and it has allowed people to remain competitive," he said. "If you can be the first one to take an idea from just the idea conception to having something running, in a safe way, faster than anyone else, there is a real advantage."

Proliferation has also caused weaknesses in the market structure to be exposed related to "algos run amuck".

"People are learning their lessons, but the more automation you put into one of these systems and the more participants who are really just basing their trading strategies off of signals and letting the computers and robots do the work, the more opportunity there is for unforeseen emergent behaviour to occur," he said. "Exchanges have beefed up measures around kill switches…but we certainly have not seen the last of the major algo blow ups."

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