Automated Trader Magazine Issue 21 Q2 2011
Several firsts this month, and a second. To deal with the second first, we go straight on with part two of our Buyside Beat discussion on model development and longevity on page 32, while the Sellside Round Table – the first of our firsts – gets together for the first time on page 76 to settle our questions about algo execution in the FX markets. Not sure why the sellside gets furniture while the buyside has to stay out on the beat, but if you’re working on trading ideas and models with a view to moving a little currency around, I can tell you right away – you’ll have no problems with timing. Your instincts have led you to the right magazine at the right time.
Not exactly a first, but while we’re talking about FX, I’d like to draw your attention to page 26. Shayla Walmsley has been off on her travels again, and she returns with this excellent piece on the challenges (and opportunities) presented by non-convertible currencies. “Trading tomorrow’s majors”, Shayla has called her piece, and not just because she’s been to China and talked about the renminbi’s eventual convertibility – it takes more than one currency to make a pair, and there are quite a number of other challenging (and opportunity-packed] non-convertibles around. [Do you mind if I just slip in a quick mention of David Dungay’s cover story on page 20? I know it’s MiFID, and we all know how much fun it is to read about the European legislative process, but it’s important. No, really.]
Another first – and I am truly delighted to be associated with this one – is the unmasking of a member of Andy Webb’s Wrecking Crew on page 66. The Wrecking Crew provides our regular software reviews, and – perhaps this is something to do with their caring, sensitive, sledgehammer-driven approach to stress testing – their names are usually kept out of it. But this month, I can reveal – Dr Yang Wang, Head of R&D, Financial Software Engineering, member in good standing of the Wrecking Crew, who presents a fascinating account of his experiences using the eSignal, CQG and STS APIs. (We sent Andy down to the corner shop for a bigger wrench, but he’ll be back next month.)
You’ll find Dalton H Mota on page 6. Dalton is a Brazil-based trader and researcher (he’s head of the research consultancy Asymmetrica) who also teaches executive- finance classes. By trading real money, Dalton explains, he becomes a better researcher, and vice-versa. We talk to him mainly about the trading-real-money part. On page 90, Robert Almgren, President, and Christian Hauff, CEO of Quantitative Brokers, illustrate the use of an agency algorithm to take a long position in CME Eurodollar futures, while on page 40 – returning to FX for this page’s big finish – we present Andy Schnappberger of 24FX.
What can we say about Mr Schnappberger? Just this. He considers a total return since launch of 900% to be “not that amazing”. And he’s looking for partners to launch a fund.
We got to him first, okay?
- Perfect Asymmetry?
Dalton H Mota runs Asymmetrica, a research consultancy in Brazil. He’s a trader as well as a researcher, and finds time to hold down a professorship too. An engineer by (early) training, he’s consulted by global investors and corporations, and he got his start trading popcorn futures. David Dungay went to meet him.
- Playing the field
Sorry. It’s MiFID again. Europe’s playing-field levellers are having another go. MiFID 1 made life on the markets rather too interesting, so here comes another attempt to achieve the European trading equivalent of living happily ever after – by order. We sent cub reporter David Dungay (who retained an inconvenient degree of youthful idealism) to face the Directive known as MiFID 2 and report back on its likely impact on European trading. David has returned, a sadder and wiser European Trading Correspondent, and this is what he has to say.
- Trading tomorrow's majors
If you want to get ahead of the FX market, trade non-convertible currencies. There is already a lot of activity in ‘tomorrow’s majors’ – the relatively obvious non-convertibles where there’s a good prospect of future convertibility – but don’t limit yourself to the high-profile ‘non-con’ pairs. Non-convertible FX is nowhere near maturity as a market, but that hasn’t stopped a critical mass of FX traders positioning themselves for a future FX market that is strikingly different from today’s. Shayla Walmsley joins the China watchers.
- What do the traders say?
For the second instalment of our two-part opener for our new regular Buyside Beat feature, David Dungay spoke to traders and other buysiders about the many challenges they face in the quest for alpha. This month, the discussion ranges over the development and implementation of new trading ideas, and then moves on into the life-span of models before finally addressing the feasibility and usage of adaptive parameters in modelling. [Buyside Beat part one may be found in the Q1 2011 issue, page 18, or online here]
- The Automated Trader Interview
24FX Management’s Andy Schnappberger describes annual returns above 20% and a total return since launch of 900% as “not that amazing”. We disagree. The firm was launched in 2001 and provides “specialised currency risk management for an exclusively international client base”. The approach is to “focus solely on our specific areas of core competence in the field of fx trading, technical analysis and advisory”. Larry Levy went to meet Andy Schnappberger, and found him looking for partners to launch a fund.
- Dark Pools and Order Handling in Europe: Getting the Complete Picture
The 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.
- A Greener Shade of Blue
Recent events at Turquoise, such as its acquisition of derivatives platform EDX, certainly appear to have piqued plenty of buyside interest. In fact, to judge by the number of times its name keeps cropping up in conversations with Automated Trader’s readers, you could be forgiven for assuming that rainbows were now monochrome. So we thought we’d better follow up by packing off Automated Trader’s Founder, Andy Webb, to talk to Adrian Farnham, CEO of Turquoise.
- Trading in Europe: Coping with Change
By 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.
- APIs: Real World Modelling
Something of a change in this issue’s software review, with a former Automated Trader First Person (see page 5 of the Q3 2010 issue) and previously anonymous Wrecking Crew member taking centre stage. Yang Wang uses multiple APIs for programming trading models and tools both for in house use at Chiron Investment LLP and for distribution to the clients of Financial Software Engineering Ltd, where he is currently Head of R & D. As a result, he is ideally placed to give his views from the sharp ends of the eSignal, CQG and STS APIs.
- FX executions
Leading sellside figures discuss the key challenges traders face in using algo execution in the FX markets and the distinct characteristics of FX algo usage, and assess the critical differences between FX and other asset classes in the automated and algorithmic context.
- A Different World
We’ve written about plenty of equity and FX algorithms, and featured fixed income and derivatives trading venues, but haven't yet featured an algorithm designed for the complex world of interest rates and their derivatives, so we thought it was time that changed - here's a fascinating look at the use of an agency algorithm to take a long position in CME Eurodollar futures.
- New model wanted
Those overpaid layabouts in what used to be called the broom cupboard have finally come up with a prediction. And it’s a good one. Whatever next?