Automated Trader Magazine Issue 18 Q3 2010
Congratulations first of all to Lawson McWhorter, who wins the iPad in our Readership Survey prize draw. Mr McWhorter (left) is a quantitative equity portfolio manager with a large global asset manager, and tells us: “I rely on Automated Trader to stay on top of developments in automated and high frequency trading, to see what innovations might impact my business as an institutional portfolio manager, and to learn what those on the cutting edge are up to. I particularly like reading the interviews with other money managers.” I hope you enjoy our interview with Stephane Coquillaud of TD Securities on page 42, Mr McWhorter, and if you turn from there back to page 24, you’ll find more of particular interest to quantitative managers and traders.
The Readership Survey results themselves appear on page 88 – they’re a fascinating insight into what we’re all actually doing – and on page 82, John Howard gives us further evidence of the mood of the industry with his report from this year’s SIFMA in New York. John took a video camera with him to SIFMA, so if you happen to have won a particularly smart piece of technology recently, and if you happen to like watching interviews with industry figures – you guessed it: scan those barcodes. Bob Giffords looks at changes in the ‘trading landscape’ of Europe (and beyond) on page 96, while this month’s ‘Anatomy of an Algo’, page 102, is an absolute treat. Thanks to Kevin Twitchen, global head of algorithmic trading at Morgan Stanley, for that one.
Of course, these past weeks haven’t been entirely about having fun with algorithms, and if there’s a combative tone to some of our coverage – you can probably guess why. We take a close look at the events of 6th May on page 60 – with a breakdown of the timeline on page 74 – and if you haven’t been anywhere near page 78 yet – well, you haven’t heard the last of that man who went on an oil-trading spree in his local bar just recently. We get stuck into the US and European regulatory debates on page 52, and perhaps I should clarify that Andy Webb went out of his way to take a look at SGX in Singapore – page 32 – because he was interested in what they have to offer. Nothing to do with Europe’s proposed curbs on bonus payments, nor anything to do with the apparently poor quality of some legislative thinking in Europe and the USA.
Come on back, Andy. It hasn’t happened yet.
William Essex
Editor
- Contents
- Flash Crash & Systemic risk interview: Diana Chan, Chief Executive Officer of EuroCCP
The so-called ‘flash crash’ on 6 May 2010 briefly wiped $1 trillion off US market capitalisation, and caused no shortage of heated debate and finger pointing. Bob Giffords, independent banking and technology analyst, talks to Diana Chan of EuroCCP.
- Flash Crash & Systemic risk interview: Bob Fuller, non-executive director of Fixnetix
The so-called ‘flash crash’ on 6 May 2010 briefly wiped $1 trillion off US market capitalisation, and caused no shortage of heated debate and finger pointing. Bob Giffords, independent banking and technology analyst, talks to Bob Fuller of Fixnetix.
- Flash Crash & Systemic risk interview: Hirander Misra, co-founder and chief executive of Algo Technologies
The so-called ‘flash crash’ on 6 May 2010 briefly wiped $1 trillion off US market capitalisation, and caused no shortage of heated debate and finger pointing. Bob Giffords, independent banking and technology analyst, talks to Hirander Misra of Algo Technologies.
- Flash Crash & Systemic risk interview: Richard Balarkas, President and CEO of Instinet Europe
The so-called ‘flash crash’ on 6 May 2010 briefly wiped $1 trillion off US market capitalisation, and caused no shortage of heated debate and finger pointing. Bob Giffords, independent banking and technology analyst, talks to Richard Balarkas of Instinet Europe.
- What just happened?There's high-frequency trading, and now there's high-frequency crashing. But identifying the causes of the 6th May 2010 'flash crash' has proved to be a relatively slow process. Bob Giffords goes in search of causes, outcomes, explanations and lessons to be learned.
- Anatomy of a Crash
Drawing on official documents and news reports, Bob Giffords charts the course of one day’s trading in New York.
- Let's do hunch!
What is the ideal relationship between programmers and traders? How can the two sides work most effectively together to achieve the optimum result? Automated Trader’s David Dungay spoke to Dr. Yang Wang of Chiron Investment LLP about ideas, expectations, outcomes – and programming traders’ hunches.
- Tall dark strategy?
What does the future hold for quant traders? Stuart Farr, President of Deltix, looks into the very long term.
- Everything you ever wanted to know about SGX... but were afraid to ask.
Recent months have seen Singapore Exchange (SGX) making a raft of announcements relevant to Automated Trader readers. New colocation services, upgraded technology infrastructure, commodity cross listings – you name it and SGX seems to be doing it. Andy Webb, Automated Trader’s Founder caught up recently with Bob Caisley, Head of IT & Chief Information Officer and Rama Pillai, Head of Intermediaries and Market Access SGX, to get a little more detail on this flurry of activity.
- The Automated Trader Interview
Stephane Coquillaud is a relative newcomer to algo trading with a long background in exotic option trading and risk management. He algo-trades G5 Forex currencies for Toronto Dominion Bank Securities (TD Securities), using a market-model concept and artificial intelligence techniques. In this time of heightened anxiety about market and wider risk, not to mention regulation, how does Stephane Coquillaud navigate the complexities of the currency markets, and what technology does he iuse to do it? Larry Levy, Automated Trader’s globetrotting Head of Photography, went to meet him at TD Securities’ very new London headquarters, at Number Sixty Threadneedle Street, to find out.
- There goes the neighbourhood
It’s open season on hedge-fund managers and high-frequency traders in Europe and the USA. Legislators on both sides of the pond are voting on new rules to redefine the traditional relationship between risk and reward – expect a legalese version of: don’t take the risks because we’re going to deny you the rewards. Much of this is necessary work – after all, we don’t want those naughty defaulting mid-western mortgage holders bringing down the financial system again, do we? But some of it looks more like political grandstanding than enlightened policy-making, and some of it seems downright unhelpful. Automated Trader’s Editor, William Essex, considers the possible unintended consequences of the current transatlantic regulation-fest, and wonders whether we might all be better turning up for work – somewhere else.
- ETFs: Use the Right Tool!
Planning 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.
- Happy-Hour Trading
“Another double whisky, two packets of crisps, and seven million barrels of oil, please.”
And do have a barrel for yourself. Automated Trader’s Editor, William Essex, rounds off our section on risk with a quick look at a no-tech, uncomplicated, very, very simple question that nobody has ever been able to solve.
- Return of the IT spenders
There’ll be IT spending aplenty next year, says Automated Trader CEO John Howard, returning from this year’s strikingly optimistic show in New York.
- What did you say you were doing?
Our global survey of algorithmic and high-frequency trading, conducted online through April and May 2010, has given us a fascinating insight into industry trends and best practice. Here, Bob Giffords presents his detailed analysis of the data.
- My kind of town?
Basildon, Slough, Mahwah, Weehawken … When you’re chasing liquidity, it pays to site yourself in the right part of town. Bob Giffords weighs up the factors driving change in the trading landscapes of Europe and beyond.
- Against All the Odds
Kevin Twitchen, global head of algorithmic trading at Morgan Stanley, tracks the use of a non-displayed, opportunistic, non-schedule-based algorithm to dispose of a substantial position in France Telecom during an extremely challenging trading session that coincided with a bank holiday in the UK.
- Instant Gratification. Bloomberg Tradebook API
In view of the title of this magazine, it’s probably safe to assume that a decent percentage of our readers are already exponents of API trading; it therefore seemed sense for us to take a trading API for a spin. So we have; Andy Webb, Automated Trader’s Founder, and the Wrecking Crew practise their handbrake turns on the Bloomberg Tradebook API.
- alphability
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. For more information on Alphability, please see page 56 of the Q3 2007 edition of Automated Trader or visit http://www.automatedtrader.net/Alphability.xhtm
- Cloud Woculand
Peek ahead
- Flash Crash & Systemic risk interview: Andrew Morgan, Head of Autobahn Equity Europe at Deutsche Bank
The so-called ‘flash crash’ on 6 May 2010 briefly wiped $1 trillion off US market capitalisation, and caused no shortage of heated debate and finger pointing. Bob Giffords, independent banking and technology analyst, talks to Andrew Morgan of Equity Europe at Deutsche Bank.
- What time do you call that?
Sub-microsecond latency is only impressive if you’re sure all your server clocks are showing the right time. Victor Yodaiken, CEO of FSMLabs, brings us up to date with the latest developments in network-wide clock-watching.
- Instant Gratification. Bloomberg Tradebook API
In view of the title of this magazine, it’s probably safe to assume that a decent percentage of our readers are already exponents of API trading; it therefore seemed sense for us to take a trading API for a spin. So we have; Andy Webb, Automated Trader’s Founder, and the Wrecking Crew practise their handbrake turns on the Bloomberg Tradebook API.