Automated Trader Magazine Issue 29 Q2 2013
W e ask a lot of machines these days. It’s not enough for them to do things. We also want them to learn and to evolve. Machine-learning and genetic computing are concepts that get discussed in detail in our series on artificial intelligence. On page 14, we look at the products that are being developed and marketed, while on page 22 we talk to a number of the players in this space.
Evolution is not confined to AI systems. In Exchange Views on page 40, we investigate how the corporate bond market is adapting to a more challenging climate for trading.
And speaking of change, Automated Trader has been making a few adjustments of its own. Readers will notice that both Exchange Views and Tech’s Message have been given makeovers. Rather than focusing on one expert, each now brings together a variety of views to give a wider perspective.
In that same vein, introducing: Algopedia . Like Anatomy of an Algo (which we’ll still include occasionally), this column will dissect some of the algos on offer. But rather than looking at one algo per issue, we wanted to investigate different types. Eva Szalay kicks off the new column on page 74 with a look at liquidity-seeking algos.
What does a Peace Corps volunteer in the 1970s have to do with your latency? Find out on page 56 as Tech’s Message gets to grips with FPGAs, the acronym of choice in today’s markets.
For the last of our BRICs series, Anna Reitman reports on the trading landscape in Brazil on page 66. The regulatory picture may not be as inviting as the beaches, but people are still flocking to this fast-growing market.
Our in-depth Q&As feature a couple of well-known figures from the market. In First Person on page 10 we catch up with futures industry stalwart Chris Hehmeyer, who runs HTG. Me and My Machine on page 32 spends time with Manoj Narang of Tradeworx, who is never at a loss for words when it comes to HFT and regulation. Our academic guest in Dequantification is Leilei Shi of the University of Science and Technology of China, who tells us about his studies in volume trends on page 90.
Software Review on page 78 gets its hands dirty with historical data as the Wrecking Crew looks at Thomson Reuters tick data.
After all the hand-wringing over OTC regulation, implementation has finally begun. On page 46, we explore how derivatives regulators are coping with the long-awaited flow of swaps data. We also hear from a top official at the SEC on its experiences making sense of data.
Finally, regulation is hardly the only disruptive force in markets. On page 84, Mary-Ellen Barker explores what a new venture called Quantopian is doing to shake up the industry.
- Running man: HTG's Chris HehmeyerIt seems somehow fitting that Chris Hehmeyer got his start as a runner on the floor of the Chicago Board of Trade. That was in 1978 and over the next 35 years he has kept on running. Hehmeyer now runs HTG, a company that embraces all manner of traders. When he's not doing that, he also serves as the chairman of the National Futures Association. Automated Trader caught up with him to hear his thoughts on the value of diversity and what he thinks of some of the impending changes in the marketplace.
- Sex, death and the quest for algorithmic gloryYou don't need to look far to find critics of artificial intelligence methods in financial markets. But that hasn't stopped technologists and academics from trying to push the boundaries of what a computer can do when trying to analyse complex situations and make decisions. Automated Trader Editor Adam Cox talks to some of the researchers and executives who see a future for AI in the markets.
- Brain-PoweredAlan Turing once famously posed the question of whether machines could think. Applied to today's ultra-competitive markets, the question becomes, can machines think well enough to make money? Anna Reitman reports on what some of the players using artificial intelligence-based systems have to say.
- A few minutes with… Spencer Greenberg of Rebellion ResearchAutomated Trader catches up with Spencer Greenberg of Rebellion Research to hear about their work in artificial intelligence.
- A few minutes with… Marco Fasoli of Titian Global InvestmentsAutomated Trader catches up with Marco Fasoli of Titian Global Investments to hear what they're doing in artificial intelligence.
- In the worx: What Manoj Narang thinks about regulation, Europe, volatility and a lot moreManoj Narang wears a lot of hats. He's a technologist who built a low-latency platform and developed a monitoring system for the US SEC. He's an executive who runs a hedge fund and an HFT group. And he's an outspoken champion of data-driven decision-making. So why is he promoting ideas that could hurt his business?
- Where credit's dueBack in the 'good old days', life seemed so simple: dealers warehoused vast amounts of corporate bonds, and investors picked up the telephone when they wanted to buy or sell. But capital requirements and regulation have led to a dramatic fall in banks' balance sheets and the buy-side is being asked to play a bigger role to boost liquidity. As electronification takes hold, can the elusive all-to-all model take off or is something else needed? Adam Cox reports.
- The rise of the Texan sharpshooters?There is a story about a Texan who fires a bunch of shots at the side of a barn. Once he's done shooting, he walks over to the barn, paints a target centred on the biggest cluster of shots, and calls himself a sharpshooter. So what, you may ask, does this have to do with swaps regulation?
- Regulators grappling with market data: a case studyRegulators and trading firms have at least one thing in common: they both find grappling with the torrent of data generated in today's markets a tall order. The CFTC is just beginning to wrestle with the flow of swaps data, while the Securities and Exchange Commission has a head start on the equities side. It has deployed MIDAS, the Market Information Data Analytics System, developed by Tradeworx. Automated Trader met Gregg Berman, senior advisor to the Director at the SEC's Division of Trading & Markets, to find out how the regulator hopes to develop the MIDAS touch.
- Eurex Exchange releases results of proprietary HFT researchEurex Exchange is the first exchange in Europe to share part of its proprietary quantitative research on high- frequency trading (HFT) with the public. Key findings of this research include:
(a) HFT participants played an important and beneficial role during one of the most extreme market situations Eurex Exchange has seen in recent years,
(b) HFT participants play a unique and indispensable role in the recovery of market quality right after large trades, and
(c) Eurex Exchange did not find evidence of abusive HFT activity.
- Un-squeezing the middleGiven its size, it seems improbable that any trader might struggle to find an optimal way to access the FX market. Yet many mid-sized participants find themselves in exactly this situation, as they fall into a gap between full prime brokerage and direct liquidity relationships. Whether it's the complexity of the legal paperwork or costly and complicated connectivity, the end result is the same - additional expense and delays. But as Alex Knight, Head of Citi's FX Margin Trading business explains, there is now a better option.
- Outside looking inTo outsiders, the algorithmic trading industry is a citadel - big, rich, and closed to tourists. Assembling the tools needed to get behind the walls is tough, laborious and time-consuming. So what are the prospects for interlopers to prise open a gap and get inside?