Automated Trader Magazine Issue 15 Q4 2009
Thanks first of all to Frank Sinatra, Bill Braman, David Allen, Eugenio Perez and Usman Malik. The late Mr Sinatra sang us a line for a cover, and then Messrs. Braman, Allen and Perez agreed to tell us in detail about how they did it their way. The two features (First Person on page 5 and our main cover story, Me and My Machine, on page 20) are straight transcripts of the interviews on which they’re based. When you’re on the receiving end of high-level insight of that quality – well, you let them tell it their way. They’re our buy-side veterans for the month, and if you think you’d like to survive in this industry for a few more years, our advice is: get reading. [Bill Braman also features in our news pages this month – page 11. Don’t miss Bill’s latest move.]
And Usman Malik. You know those moments when you’re reminded exactly what it is about the day job that you find so interesting? Turn to page 36 for Dr Malik’s truly fascinating piece on exploiting SOR products within algorithmic trading strategies in ways that don’t impact negatively on the price-improvement/fee-reduction equation. This is important material, and although there are times when the editorial office does look rather as suggested by our cartoonist, Sarah Howells, on page 34, this month it has been full of team members silently reading and taking notes. Mick Hittesdorf writes on post-crisis system design on page 50 (backtesting with that historical data?), and yes, that is Shawn McAllister, Chief Architect at Solace Systems, discussing the latest in wide-area bridging techniques on page 60.
You’ll find an indignant rebuttal of a lot of nonsense on page 44. This industry has been misunderstood, maligned and sometimes even scapegoated in recent months, and David Dungay’s opening salvo sets the record straight. David, our newest recruit, will be taking on the lead editorial role at www.automatedtrader.net, but here on the print side, we’re conspiring to keep him for as long as possible. The ebullient Mr Dungay gets to grips with the European trading environment on page 57.
Just space to mention this month’s Anatomy of an Algo. It’s a work- through of a volatility trade executed using an advanced option execution algorithm. Don’t miss it – page 75.
It’s all yours. Enjoy it
- Spreading out
One thing you can say about Bill Braman is that he is a survivor. He’s been trading since 1987, moving from open outcry right through to today’s technologies. How does he do it? Andy Webb caught up with him in Chicago, and asked him.
- Me and My Machine: The Automated Trader Interview
For many in the world of automated trading, low latency is critical to their trading performance. By contrast, for Florida-based III, it’s just one component among many. Automated Trader’s Editor, William Essex, spoke to David Allen, III’s portfolio manager, about this. While they were at it, they also discussed “appropriate automation”, artificial intelligence, data interpolation, integrating fundamental data, data maintenance, synthetic markets, in house and outsourced and avoiding the herd - among other things…
- Combining Algorithmic Trading with SOR
Smart Order Routing (SOR) has been the buzz phrase in European equity trading over the last 18 months. Deregulation of trading venues allowed Multilateral Trading Facilities (MTFs) to trade stocks listed on other exchanges. Consequently trading service providers started offering SOR products to allow clients to trade the same stock on MTFs as well as the original exchanges where stocks are listed (the primary exchanges). However, SORs are limited in how much trading fee reduction and price improvement they can obtain. Dr Usman Malik, partner of algorithmic trading specialists PE Lynch, outlines how combining SOR with algorithmic trading strategies offers a method to overcome the limitations of standalone SOR.
- Flash ban wallop
Who loves ya baby? Well, if you’re an automated/algorithmic trader (and especially if you trade high frequency), right now it probably feels like nobody does. A grubby summer of media drive-by shootings haven’t done much for your popularity. David Dungay sets the record straight.
- Get real!
Historic performance data is no longer even remotely reliable as a clue to what’s going to happen next. What does that mean for system designers? Whether we’re modelling for another catastrophe, or planning for the V-shaped, W-shaped, rune-shaped or just wiggly-line recovery, we need to factor in the market’s potential to turn weird so fast that you can’t switch off the machines in time. And how do we do that? For Mick Hittesdorf, it’s all about Japanese cars.
- Europe in Pieces: For whom the bell tolls
The tussle between national exchanges and MTFs in Europe is hotting up. Who’s going to win? We packed David Dungay off to find out.
- Bridge over troubled WANs
If you’re running data over a world-sized wide-area network, latency is a function of geography. And in the absence of radical downsizing, geography happens to be an irreducible constant. And that’s not good. Shawn McAllister, Chief Architect, Solace Systems, discusses the latest in wide-area bridge-building techniques.
- The Top 7 Questions You Need to Ask when Researching Ultra-Low Latency Connectivity
Wiring 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.
- High pressure performance
One 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.
- Delivering Delta Neutral
Joseph Corona, Director of Strategic Planning at ConvergEx’s LiquidPoint, profiles a volatility trade executed using an advanced option execution algorithm capable of handling both the option and stock legs of the trade simultaneously.
Alphability are Automated Trader’s proprietary tradability metrics. They are environmental statistics intended to assist those building trading models/systems in determining which markets and timeframes are most favourably responsive to which generic types of model.
- Passionate about peeking
Swirling incense and a lot of passionate peeking this month. Just mind that butterfly!