Automated Trader Magazine Issue 23 Q4 2011
We’ve struck gold this month, in more ways than one. First, in our Me and My Machine series (page 22), we have a really very interesting interview with Cristiano Migliorini and his colleagues at the UBAM Gold + Fund. Andy Webb asks the questions, and the discussion ranges from the (to me, surprisingly wide) variety of strategies that can be applied to the challenge of making money from the nice yellow metal, through the fund’s development and application of its “machinery”, to Cristiano Migliorini’s pleasing conclusion that if a fund is investing in gold, by whatever application of technology and innovation, it should end the month by owning actual physical gold. I like that kind of thinking. [You may notice the news item, in our Latest News pages (from page 14) on Scoach Switzerland’s launch of gold as a trading currency. Yes, please.]
You’ll find more positive thinking on page 6, where our First Person this month is Philippe Bonnefoy, co-founder with Riadh Fessi of Eleuthera Capital AG. The investment philosophy there is – if I may cut a long and fascinating interview down to its key point – to make positive returns from fully automated short-term currency trading. Eleuthera Capital AG is a new venture; its two founders are veterans of many years’ experience in our industry; and I strongly recommend allocating some time to finding out how Mr Bonnefoy and Mr Fessi approach the challenge of accentuating the upside and minimising the downside. If you’re in the strategy-building business yourself (and I think that covers just about all of us), turn from page 6 to page 36, where you’ll find Daniel Riek, CTO, Vincorex, talking about open-sourcing, future-proofing, building for the long term.
Interesting piece from Thomas Becker of Zephyr Associates on the K Ratio, new and old, page 62, and you won’t want to miss our Wrecking Crew’s verdict on TickData’s data service and its TickWrite application in this month’s Software Review (page 77). I enjoyed the distinctly stormy Anatomy of an Algo delivered by Murat Atamer, Head of AES Product for Asia Pacific, Credit Suisse Hong Kong on page 94, and if you’ve ever wondered what everybody else is doing while you’re slaving over a hot algorithm, you’ll find our 2011 Readership Survey, mediated by independent analyst Bob Giffords, on page 46. My thanks to everybody who contributed to that one, and I hope you find Bob’s presentation as insightful as I did. All that, and Oslo Børs too. Page 73. Interesting conversation with Kjetil Nysæther, Senior Vice President, Information Technology, Oslo Børs, about streamlining technology.
- Accentuate the positivePhilippe Bonnefoy is the co-founder of Eleuthera Capital AG, where the investment philosophy is to make profits on capital when markets are not trending, and the belief is that this aim can be most effectively achieved by the use of automation. Larry Levy went to find out more.
- The Automated Trader Interview"Gold is a key component of every investor's portfolio", says Cristiano Migliorini, head of quantitative research for Union Bancaire Privee (UBP)'s UBAM Gold + Fund. "Gold provides an effective hedge against monetary debasement, inflation and equity market shocks. Yet, simply going long gold has disadvantages." So how do you invest - trade - advantageously in gold, and what role does automation play in the process? Andy Webb went to meet the UBAM Gold + team.
- Getting the Execution EdgeInstitutional 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.
- Tech's message: Open up!In the second of our series of conversations with key industry figures about ensuring the long-term survival of the enterprise, Daniel Riek, CTO, Vincorex, discusses the potential role of the open source community as a provider of future proofing through dialogue.
- 2011 Algorithmic Trading Survey Report and AnalysisThe pace of change continues to accelerate as competition and technology drive non-stop innovation. What is increasingly clear is that the world is powering up its financial markets for pervasive 24x6 electronic trading, machine to machine (M2M), across all asset classes, geographies and data types. This represents a phase shift in the economic history of the world, and regulators will have to get their skates on if they intend to keep up. Market participants broadly welcome these changes. Sadly, however, they appear to be more sceptical regarding the various regulatory initiatives taken or being considered in response to the continuing financial crisis.
- Quant Trading: Productivity from A to ZIt'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.
- Special KIn 1996, the quant trader Lars Kestner published a book introducing the K Ratio as a complement to the Sharpe Ratio. In 2003, he modified the K Ratio and published a revised version of his book (Lars Kestner, Quantitative Trading Strategies: Harnessing the Power of Quantitative Techniques to Create a Winning Trading Program, McGraw-Hill Traders Edge Series, 2003.) to explain why. Thomas Becker of Zephyr Associates thinks he was right first time.
- Parallel PerfectionFor 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.
- Oslo Børs: Streamlining the Technology StackThe announcement in August of this year that Oslo Børs had decided to move its equity and fixed income trading onto the London Stock Exchange Group’s (LSEG) Millennium Exchange trading platform was obviously good news for MillenniumIT. But it was also another pragmatic step by a exchange where IT strategy is also an integral part of business strategy. Kjetil Nysæther, Senior Vice President Information Technology at Oslo Børs talks to Automated Trader about this approach and the way in it which dovetails with the exchange's ongoing process of streamlining technology to minimise its footprint.
- Tick Data: Crunchable NumbersA regular conversation piece with our readers is data. Not just the usual "faster, faster" topic, but also how to minimise the management overhead of historical data used for analysis and model building. Which led Automated Trader's Founder, Andy Webb, and our friends in the Wrecking Crew to take a look at Tick Data's data service and its TickWrite application.
- New NewsMachine 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.
- Stormy Waters, Safe Passage with the Semi-Automated TraderDealing Hong Kong stocks under conditions of extreme volatility is the trader's equivalent of steering a ship in a South China Sea typhoon. Bid/offer spreads blow out and sudden, spectacular price movements are a constant threat. But you can trade successfully while the storm is raging, using opportunistic algorithms and relying on sophisticated risk management tools - which have become indispensable since the "flash crash". Murat Atamer, Head of AES Product for Asia Pacific, Credit Suisse Hong Kong, shows how to achieve better performance and safer trading in a sea of uncertainty.