‘Sponsored Articles’ Algorithmic Trading Articles & Financial Insight
Articles that have appeared in Automated Trader from leading banks, brokers and technology vendors.
- MIFID II Clock Sync Requirements
SUBSCRIBERS ONLYJanuary 2018. MIFID II RTS 25 compliance begins. Five requirements. Seems simple enough, right? Not so fast ...
- Market data considerations in a new regime
There is an ever increasing need for market participants to improve returns and at the same time to manage risk. Yet these opposing forces are fraught with challenges.
- Cancelled IOC orders reveal information about potential liquidity in options market
Deutsche Borse's new analytic, the 'Eurex IOC Liquidity Indicator for Options' creates potential for improved price discovery and offers new signalling opportunities.
- Market Surveillance, it's a Matter of Risk Management
Technology is making a sweeping transformation in trading styles from the accelerating use of algorithms. The increased automation overlaid on a complex market structure provides fertile ground to a broad spectrum of market manipulation and abusive behaviors. This has set the stage for increasing regulatory oversight where the burden of proof rests with market participants to demonstrate control over their trading activity. Surveillance consequently becomes a matter of risk management.
- Consistently Fast Java: a Business Real-Time Reality
While Java has plenty of virtues, jitter has been a long-term blot on its reputation. However, this is an issue specifically targeted by Azul Systems' Zing Java Virtual Machine (JVM). As Gil Tene CTO of Azul Systems explains, solving this problem means that business real-time Java performance is now genuinely comparable to languages such as C++. Add in memory layout refinements that Azul is proposing for Java's next version, and the case for using it in latency-sensitive trading applications becomes compelling.
- Interactive Brokers: The API of Many Flavours
Interactive Brokers (IB) was at the forefront of API development in the earliest days of automated trading and now has thousands of individual and institutional clients using the various flavours of its API. Automated Trader's founder, Andy Webb, talks to Pete Spiro, Senior Programmer at IB, about the API and its users.
- Seizing New Trading Opportunities
Markets are by their very nature competitive, but the growing prevalence of technology in recent years has only served to intensify this competition. One consequence of this is the way in which long-established trading strategies have become non-viable. However, as Steffen Gemuenden, CEO of RTS Realtime Systems explains, in a global trading environment there are still plenty of profitable opportunities - if you know how to access them.
- Straight Through Workflow with Added Alpha
Regulation can dramatically change trading conventions and market structure. One example of this in the ETF market is the Volcker Rule within the Dodd-Frank Wall Street Reform and Consumer Protection Act. This has fractured the ETF market making it hard for traditional buyside investors to tap the ETF liquidity they need on a request for quote (RFQ) basis. Fortunately, as Gary Stone - Chief Strategy Officer Bloomberg Tradebook - explains, there is now a solution.
- Promoting transparency through data analysis on latency
Technology is one of the most important cornerstones of electronic markets and, more broadly, of today's global markets. As technology allows for increasingly complex systems from a design standpoint, it is essential to get a clear view on each step inside a system to understand outcomes. Gathering data at discrete points within such systems is a practical way to break down the complexity and deliver digestible information.
- ETF Liquidity: Hidden Depths
A quick glance at the screen would seem to suggest that ETFs have a mounting liquidity problem. Not so, explains Gary Stone, Chief Strategy Officer, Bloomberg Tradebook. If you know where and how to look there is ample available liquidity.
- Un-squeezing the middle
Given its size, it seems improbable that any trader might struggle to find an optimal way to access the FX market. Yet many mid-sized participants find themselves in exactly this situation, as they fall into a gap between full prime brokerage and direct liquidity relationships. Whether it's the complexity of the legal paperwork or costly and complicated connectivity, the end result is the same - additional expense and delays. But as Alex Knight, Head of Citi's FX Margin Trading business explains, there is now a better option.
- Eurex Exchange releases results of proprietary HFT research
Eurex Exchange is the first exchange in Europe to share part of its proprietary quantitative research on high- frequency trading (HFT) with the public. Key findings of this research include: (a) HFT participants played an important and beneficial role during one of the most extreme market situations Eurex Exchange has seen in recent years, (b) HFT participants play a unique and indispensable role in the recovery of market quality right after large trades, and (c) Eurex Exchange did not find evidence of abusive HFT activity.
- Information, Liquidity and the Center of Opportunity
For many, latency was once the be-all and end-all of electronic trading. But as globalization and the whipsaw of quantitative easing drives a tighter coupling between debt and currency markets around the world, there's a more important directive emerging for market participants - access to information, and lots of it. As John Knuff, General Manager of Equinix Financial Services, explains, information is what begets liquidity - and you need high-quality information in a timely manner in order to manage risk and trade smarter.
- China Rising: Innovation and growth in its markets
China is already renowned for the prowess of its commercial trade, but there are already signs that trade in its financial markets could soon become as prominent. Steffen Gemuenden, CEO of RTS Realtime Systems Group, explains how innovation and growth in Chinese markets make them an almost mandatory element in any trading professional's market mix.
- Adaptive Numbers - Accelerating Algorithmic Prototyping to Production
Today's financial markets are a classic example of an environment where adaptation is essential for viability. Apart from challenging conventional 'single market/discipline/model' thinking, this situation also highlights the need to accelerate the transition from prototype to production. While this transition has historically proven a major deployment speed bump, as Steve Wilcockson - Industry Manager for Financial Services at MathWorks - explains, the situation is improving.
- A Tech Strategy for Multiple Futures
Lower volumes and margins inevitably pushed technology cost reductions up the agenda post-2008. But achieving these alone is no longer enough. As Stanley Young, CEO of Enterprise Products and Solutions at Bloomberg explains, the firms that will survive and thrive in the future are those whose technology infrastructure also delivers the flexibility and performance to address business risks and challenges that are continually changing.
- Cruisin' the Freeway
Those looking to employ more sophisticated trading strategies, involving multiple instances of multiple strategies in a co-located environment at minimum latency, face two unattractive alternatives. Off the shelf solutions are extremely costly, while building the same functionality in house is enormously time consuming. Fortunately, as Hazem Dawani, President & CEO of OptionsCity explains, these barriers need not be as insuperable as they appear.
- Pathway to Performance
While deploying a trading model as quickly and efficiently as possible is a priority for any trader, a major obstacle to this at present is the constraint on IT resources. Particularly for traders looking to automate their trading but lacking programming skills, this is a major hurdle. But as Gary Stone, Chief Strategy Officer at Bloomberg Tradebook explains, there is another way.
- Plumbing or Trading: The financial technology maze
FREE ARTICLEAs traders find themselves exploring new markets, time-frames, data types and geographies in search of alpha, an important question arises. Do they want to manage the integration and maintenance of all these variables, or just trade? Mark Pesonen, CEO, Enterprise Products & Solutions at Bloomberg explains why the latter is the right answer, and also how it can be accomplished.
- Latest News on the News
FREE ARTICLEWhile machine readable news has been around for a few years now, many solutions have been rather modest in terms of their geography, depth/uniqueness of content and potential user base. However, as Georg Gross, Head of Front Office Data & Analytics at Deutsche Börse explains, that's now all changing for the better.
- European Dark Pools: Quality, Control and Change
FREE ARTICLEWhile the demand for non-displayed liquidity in Europe remains strong and the growth of European dark pools continues, there are pools and then there are pools. The quality of liquidity in a dark pool depends not only on the participants, but also on the quality control the dark pool operator is able to exert. Moreover, as Christian Hesse, Senior Quantitative Strategist for Autobahn Equity Algorithmic Trading at Deutsche Bank explains, there is the issue of pending regulatory change to consider.
- Brazil - The Challenges of DMA and Risk Management
As the Brazilian economic freight train gathers momentum, Timo Pentner - Managing Director Americas, at RTS Realtime Systems, explains why the market's demand for ultra-low latency DMA access and the regulators requirements for rigorous risk control don't have to be mutually exclusive.
- Keeping the Edge in U.S. Options Strategies: Expanding from a Pair to N-Legs
FREE ARTICLEPair trading is one area of the market that has changed significantly over the past year. Traders are increasingly aware that their long-established methods of trade execution are now less accessible and that more complex trading strategies deliver more alpha per unit of risk. Gary Stone, Chief Strategy Officer at Bloomberg Tradebook, examines one way in which pair traders can overcome these issues to keep and enhance their edge.
- New News
FREE ARTICLEMachine readable news has been with us for a while now and has moved into the mainstream as an input to traders' alpha and execution models. To date, the majority of services have primarily focused on major economic announcements, but traders are already looking for more from providers in terms of both flexibility and new data. Georg Gross, Head of Front Office Data & Analytics, Deutsche Börse AG, examines some of these new areas of demand and opportunity.
- Parallel Perfection
FREE ARTICLEFor brokers servicing HFT clients and for direct members in the HFT business, life doesn't get any easier. More markets, more competition, more regulation and the most demanding of end users mean pressure to perform is intense - particularly as regards risk. Regulation and self-preservation make risk checks mandatory, but end users dislike the latency they add. Matt Dangerfield, Director of Trading Solutions at Fixnetix, outlines the optimum way to square this circle.
- Quant Trading: Productivity from A to Z
FREE ARTICLEIt's a fact of life that top flight quant traders don't come cheap, which is all the more reason to ensure that they have the right tools to maximise their creative productivity. Yet all too often the development environment in which they work is no more than that - just a development environment. RTS Realtime Systems proposes an alternative: a holistic development and deployment environment for trading models that maximises the return on intellectual property.
- Getting the Execution Edge
FREE ARTICLEInstitutional traders inhabit a different world from their prop cousins. Their discretion is more restricted, and when using execution algorithms the common expectation is that they will use their experience and expertise - as opposed to more quantitative techniques - to fine tune the algo's settings. Yet there are still quantitative ways in which they can reliably add execution alpha, as Gary Stone, Chief Strategy Officer at Bloomberg Tradebook explains.
- Enhancing network transparency
FREE ARTICLEVassilis Vergotis, head of Eurex's office Americas explains the exchange's transparency statistics for member firms and how the mutually beneficial information policy resonates with high-frequency customers.
- Covering All the Bases
FREE ARTICLEPriorities change; to be truly effective, today’s platforms for trading model design have to cover a wider and more varied number of bases than just five years ago. Development speed, lower cost, flexible security models, tighter execution environment integration and stringent control of operation risk are all now major priorities. Michael Unetich, ADL product manager at Trading Technologies, outlines one way to address them all. Michael co-founded TickIt Trading Systems and served as its CEO until Trading Technologies acquired the company in June 2010.
- High Frequency Trading: One Size Does Not Fit All
FREE ARTICLEHigh frequency trading has already evolved to the point where it actually covers multiple sub-disciplines. For some of these, latency is still the be all and end all, while for others it is just one of many factors that will determine a trading strategy's success. This evolution means that the sellside challenge has also evolved. As Andrew Morgan, European Head of autobahn Equity at Deutsche Bank explains, the sheer diversity of high frequency traders means that a far more flexible approach is now required.
- Just Showing Up "On Time" Isn't Enough
FREE ARTICLERecently, many of our client conversations have focused on high-frequency latency arbitrage. The concern: many order routers do not compensate for differences in the distance to the various market venues. Thus, orders to several market venues sent at the "same time" arrive at their destinations at different times. These discrepancies may provide an opportunity for high-frequency algorithms that make markets simultaneously on several exchanges to exploit timing differences by cancelling some orders after the first one is filled.
- Trading in Europe: Coping with Change
FREE ARTICLEBy their nature markets are seldom static, but the current situation in Europe appears both particularly fluid and demanding. Mergers between trading venues, new market participants, new trading strategies and new attitudes to latency all have the potential to consume time and resources. But as Patrick Lastennet, Director Financial Services Segment at Interxion explains, there is a better way.
- Dark Pools and Order Handling in Europe: Getting the Complete Picture
FREE ARTICLEThe Markets in Financial Instruments Directive review, commonly referred to as MiFID II, is expected to address some post trade transparency issues possibly with the creation of a consolidated tape for Europe. Post Trade Transparency is a critical need but greater insight into order handling is of equal importance – as Gary Stone, Chief Strategy Officer at Bloomberg Tradebook explains.
- Options and Equities: All Together Now
FREE ARTICLEOne consequence of increasing market fragmentation has been the continual challenge of combining a holistic view with a holistic execution environment that includes all the right tools. While this fragmentation effect now applies across many market segments, it is particularly acute in US equities and equity options. Most solutions currently available here can at best only deliver a partial solution. Gary Stone, Chief Strategy Officer at Bloomberg Tradebook, takes a look at what’s needed to deliver the complete package - and how to get it.
- Automation Without Tears
FREE ARTICLELiterally thousands of traders around the globe use Excel TM to develop and run their mechanical trading models. But until now, the unbridgeable gap has been a bullet-proof way to automate those models for real time simulation and live trading. Gary Stone, Chief Strategy Officer, and Howard Stone, Product/Business head for Tradebook API at Bloomberg Tradebook outline the ideal solution.
- Building a balanced book
FREE ARTICLEAttracting liquidity is a highly competitive business; if you don’t provide the right mix of technology and functionality, liquidity providers quickly go elsewhere. Wolfgang Eholzer, Head of Trading Systems Design at Eurex Exchange, examines some of the most important boxes a trading venue must be able to tick if it is to attract these demanding participants and introduces some of the new features Eurex will provide in its upcoming software upgrade in November.
- Which API?
FREE ARTICLEWhen it comes to APIs, one size most definitely doesn’t fit all and one size doesn’t even fit one for those trading businesses needing a mixture of APIs. Historically many vendors have tended to ignore this for their own cost and convenience, but as a result their clients end up overpaying for functionality they don’t need and/or not getting the functionality that they do. Alex Lamb, Senior Vice President Business Development at RTS Realtime Systems Group, takes a look at some of the specific types of API and functionality that traders currently do require.
- ETFs: Use the Right Tool!
FREE ARTICLEPlanning to trade ETFs with ordinary stock algos? Don’t. While ETFs may be marketed as a basket of securities that are as tradable as their individual constituents, their actual trading behaviour is very different. Gary Stone, Director of Trading Research and Strategy and Ron Taur, Head of Algorithmic Trading, at Bloomberg Tradebook explain the difference in cold hard numbers.
- Low Latency Network Expertise
SUBSCRIBERS ONLYJust how much does the firm pitching your connectivity requirements really know about the nuts and bolts of running a superfast and robust network? And what investment are they making in researching the next generation of network technology? Joe Hilt, VP of Sales North America, and Fergus Innes, VP of Sales Europe, at Hibernia Atlantic, outline some of the areas where if your provider lacks expertise - you will be paying the price. The ever-increasing emphasis in financial markets on reducing latency while expanding capacity means that ground-level expertise is at a premium. Sales personnel may claim fantastic performance from carefully, cherry-picked segments of the network they lease (of which they have zero technical understanding) but how does that really play out when your trades hit “their” fibre?
- Alpha Grabber
FREE ARTICLEOne of the realities of electronic markets is that alpha opportunities are often transitory; a profitable market inefficiency is only profitable if you can exploit it before the competition. So if you want to grab that alpha before everyone else does, you need to be able to build, test and deploy your new trading models before they can. Gary Stone, Director of Trading Research and Strategy at Bloomberg Tradebook, maps out the fast lane to model development and deployment.
- Recent Regulatory Initiatives Affecting High Frequency Trading
FREE ARTICLEHigh frequency trading (HFT) has gained the attention of U.S. and European regulators. Both the U.S. Securities and Exchange Commission (SEC) and the EU Committee of European Securities Regulators (CESR) have recently announced initiatives that could greatly affect HFT and the market structure for equity securities. While the U.S. Commodity Futures Trading Commission (CFTC) has not yet announced a similar initiative, the Commission of the European Communities (EC Commission) previously announced a similar review of the derivatives markets, and it can be expected that the CFTC will, at some point, join in the action.
- Intelligent Workflow - Paired
FREE ARTICLEAll the workflow issues associated with trading double when you’re trading pairs. While it’s possible to deal with some of these with intelligent software design, the challenge is to streamline the workflow without removing so much discretion that the human trader cannot deliver alpha. Gary Stone, Director of Trading Research and Strategy at Bloomberg Tradebook, explains how to strike the right balance.
- High pressure performance
FREE ARTICLEOne of the mantras on any trading desk these days is “do more with less”. Sabrina Rovelli, US Equity Product Manager at Bloomberg Tradebook, explains how predictive modelling can accomplish this by taking execution algorithms to the next level in terms of productivity and performance.
- The Top 7 Questions You Need to Ask when Researching Ultra-Low Latency Connectivity
FREE ARTICLEWiring up your trading operations is mission critical; failures cost money, big money. And the faster your network, the greater your returns. Plenty of network companies talk the talk, but what are the most defining questions to help you discern the true network leaders from the carrier pack? Joe Hilt, VP of Sales North America, and Fergus Innes, VP of Sales Europe, at Hibernia Atlantic, the company that powers the Global Financial Network (GFN), pose the questions that many providers would rather you didn’t.
- Black box in the Bloomberg box
FREE ARTICLEAmid all the talk of ultra high frequency trading and black boxes, automation tools for human traders are often overlooked. Yet such tools can hugely enhance productivity and profitability. Gary Stone, Director of Trading Research and Strategy and Brian Coffaro, Manager of Derivatives Development at Bloomberg Tradebook, explain how and why.
- Small Cap, Big Challenge
QUALIFIED REGISTRANTS & SUBSCRIBERSSmall and mid cap trade execution is a tough nut to crack. Long ‘dry’ periods, with occasional unexpected patches of liquidity, call for a very different execution style from large caps. Don White, Head of US Equity Product Development at Bloomberg Tradebook, explains how flexible high touch tools can be combined with conventional algos to provide a ‘mid touch’ solution that may produce enhanced small/mid cap execution performance.
- Proximity Hosting: Plug’n’Trade or Pay’n’Wait?
FREE ARTICLEProximity and trading application hosting have been some of the fastest growing areas in the evolution of automated and algorithmic trading. Mark Thornberry, Managing Director at RTS Realtime Systems, London, discusses some of the main considerations for traders evaluating its various flavours.
- Finding the Correct Path Through Market Turbulence
FREE ARTICLERecent months have seen financial markets experience more turbulence than perhaps ever before. Market corrections, war in the Middle East, sub-prime crisis, bulls and bears not sure which they are, and more recently the return of the 'big style' rogue trader have caused more volatility, I would suggest, than most have ever experienced.
- What's in Focus for 2007 Beyond MiFID and the Exchanges
FREE ARTICLEMiFID has been a key focus for many months now,given both the tactical and strategic impact it will have on the buy and sell-side,and market microstructure in particular. There is no doubt the MiFID themes play largely in our plans,but they are not the only things in focus for Goldman Sachs in 2007.
- Every trader needs an algorithm
FREE ARTICLENew breeds of aggressive algos are being designed for active DMA traders, whilst changes in market structure are making algos essential.
- Building and maintaining an algorithmic trading tool
FREE ARTICLEAs the use of algorithmic trading tools has become more widespread, clients’ expectations have similarly increased. Owain Self of UBS highlights the important considerations when developing and supporting a credible algorithmic trading tool and what it takes to maintain that credibility in a constantly changing market.
- Quantitative Approach with a Human Touch
FREE ARTICLEAs electronic trading continues to gain ground, one of the casualties has been the reduction of personal contact. While things like data, quantitative calculations, speed to market, etc, have become essential parts of this new trading frontier, the demand for the exchange of ideas and better understanding of the market place has never been greater. What are the tools available? How do they work? How can you get the best out of them?
- Algo transitions
FREE ARTICLEPortfolio transitions are very different from conventional asset management, but the judicious use of algorithms can still be hugely beneficial. Chris Jackson, Director, Execution Sales, Merrill Lynch International explains the nuances of using algorithms as part of transition management.
- Survival of the Fastest
FREE ARTICLEIn historical terms,the speed and movement of sensitive data can clearly be seen to have delivered execution advantages. Looking back nearly 200 years, Nathan Rothschild proved the benefit of having the quickest communications system in Europe in 1815 by knowing prior to the British government the outcome of the Battle of Waterloo.The communication and anticipation of market momentum continued to develop from the first stock ticker launched on the NYSE in 1867,through Louis Bachelier’s thesis on market movement predictability at the turn of the 20th Century to the dawn of the electronic era and the development of Instinet’s DOT system. The current environment,with its proliferation of order management systems and execution management systems supported by numerous instantaneous execution choices, underlines the success of market entry strategies based on timing.
- Algorithms Where do we (and you) go from here?
FREE ARTICLEA whole industry has developed around algorithmic trading. Connferences, exhibitions, publications carrying articles (not dissimilar to this one) and advertising are but a few of the activities that are providing employment and profits for many. On top of this,one must consider the costs to sell-side providers of employing project and programme managers,developers, programmers, connectivity specialists,integrators,systems, trading and support teams.Not forgetting,of course,sales people and marketing budgets needed to make the potential client base aware that the broker or bank in question is in the 'game'.
- Keeping up with the pace of change
FREE ARTICLEToday’s buyside dealers are making more complex decisions about execution than ever before – and they are expected to justify their choices to their firms and their clients.With the introduction of the Markets in Financial Instruments Directive (MiFID) approaching,the options available to the buyside are set to expand further – along with a trader’s need to demonstrate that he or she is exercising their discretion appropriately.
- The Need for Speed
FREE ARTICLEHow have we arrived in a world where every millisecond counts? The following comment may provide some insight: "The trading world is not a generous one. The first person to the market and execute doesn’t leave behind opportunities. Because speed determines the winners and losers……" (The TABB group LLC, Trading at the Speed of Light).