Automated Trader Magazine Issue 28 Q1 2013
New year, new asset classes? In our Q1 edition, Automated Trader looks at the tricky business of branching out into new asset classes, with insight from executives, quants, technologists, academics and others. As part of that series, we'll be looking at the proliferation of FX venues after a spree of new platforms emerged in the past year. And as part of the "Algo Traveller" series, we visit another BRIC country. This time, it's Russia, a country where authorities have been taking steps to make the market more appealing to both local and overseas investors.
We kick off the asset class series with our regular First Person interview. Matt Haraburda, head of XR Trading in Chicago, talks to us about what's involved when a firm wants to trade in multiple markets. He should know. Having learned his trade at the CBOT, Haraburda now presides over a firm that makes markets in a wide range of assets.
- At home in the City of Big Shoulders: XR Trading's Matt HaraburdaFrom the floor of the world's oldest futures and options exchange to a high-rise, high-speed trading firm, Matt Haraburda has watched electronic trading come of age. Automated Trader caught up with the head of Chicago-based XR Trading and got to ask him about the challenges of taking on new asset classes, the possibility of volumes returning and what he thinks are the most interesting markets to trade.
- Ever faster, yet ever more diverseAutomated Trader's latest survey conveys a picture of strong growth, dazzling innovation and growing maturity. There is a more global spread of skills and an increasing diversity of interests and priorities; all ingredients for a good market and political tensions. If anything, the pace of some of last year's trends of end-to-end automation across asset classes and jurisdictions has quickened; other trends have slowed or evolved. Enthusiasm to compete in the race to zero has not faded, although more people realise they will not be first at the exchange. Nevertheless, they are still busy investing to at least not drop too far behind the leading pack.
- To catch a thief: the dark and dangerous world of network securityHow do you deal with the rogue employee who decides what's yours is his? Or fend off hackers trying to gain access to your computers?
James FitzGerald probes the murky world of network security.
- Class acts: the tricky business of trading new asset marketsIs it any surprise that firms have ventured off in search of new pastures, trying out different asset classes, given the persistent lull in trading activity in the world's equity markets? Adam Cox reports on what they need to consider when branching out.
- Gaining a foothold in FXAdam Cox reports on the continuing appeal of the massive foreign exchange market for funds, brokers and vendors alike.
- An AXA to grindYou might think Christophe Roupie already has enough on his plate. He runs the trading operation for one of the biggest asset managers in the world, with a 55-strong team in London, Paris and Connecticut and he has plans for a presence in Hong Kong. But he is also keen to spend more time in Brussels. As he tells Automated Trader Editor Adam Cox, the buy side can do a lot more to work with regulators and ensure more sensible rules are put in place.
- The hammer, the sickle and the algo: Russia's unorthodox journey to a thriving marketRussian peasants performing calculations a couple of hundred years ago may have paved the way for the current boom in algorithmic trading in Russia.
- Six big questions for a Russian investment fundAs part of its focus on Russia, Automated Trader spoke to Konstantin Khlebalin, head of the trading department at proprietary trading group Infina, about what kind of algorithmic trading his firm does.
- Going with the flowLiquidnet does not fit the typical dark pool profile. For one thing, the venue is only open to institutional buy side firms. For another, the users collectively control more than $13 trillion in assets. Automated Trader caught up with Chief Operating Officer John Kelly to hear what the venue and its members have been up to, and where it's going.
- Cloud formations - MarketPrizm's tech chief scans the horizons for different ways of doing businessJacob Lindeman became chief technology officer for data and connectivity group MarketPrizm as part of its acquisition by Colt in 2011. He talks about a down-to-earth, business-like mind set for solving problems. But as Automated Trader's Adam Cox learns, his head is also in the clouds.
- Merger Arb FlipOne certainty of markets is uncertainty, so even established investment strategies don't necessarily play as expected. Gary Stone, Chief Strategy Officer, and Yurij Baranksy, R&D Head of Cross-Asset Arbitrage Trading and Options Trading at Bloomberg Tradebook illustrate an example from the world of merger arb, where a manager's new twist on a trade creates a major pairs challenge for his trading desk.
- A New Look at MomentumTime series momentum strategies are about as old and ubiquitous as the CTA community that uses them, yet there has been surprisingly little recent academic work done in this space. Notable exceptions to this are two papers produced in 2012 and 2013 by Dr. Nick Baltas and Prof. Robert Kosowski of Imperial College London. Automated Trader talks to the authors about their work and some of the conclusions, which run counter to established thinking.
- Cointegration: Assume Nothing, Check EverythingThis issue, in a departure from our usual review format, we take a look at something that the Wrecking Crew frequently encounters when reviewing stat arb software - cointegration testing. Used appropriately, cointegration tests can add value, but misapply them and the only reversion you'll see is your trading equity in the direction of zero. Crew members Aly Kassam and Michael Weidman of Quantitative Support Services explain how really understanding what you are doing and appreciating the limitations of cointegration tests is critical to their successful deployment.
- Dodd FranklyLanguage matters. When people start talking about putting customers first or fighting for level playing fields, should you be worried? Everyone, it seems, is talking their books.