Automated Trader Magazine Issue 30 Q3 2013
Bob Dylan said you don’t need a weather man to know which way the wind blows.
Actually, some financial trading firms clearly disagree, since they employ their own meteorologists. Either way, there’s no question you should at least know the wind’s direction if you want to trade some markets. Lots of firms invest heavily to obtain the best and fastest weather data available and factor it into their strategies; as we note in ‘Weather Veins’ (page 22), the weather directly affects one-third of business activity on the planet.
In this issue, we focus on climate and seismic information – how the data is obtained and how it’s used. We speak with a Japanese scientist who thinks he may have found a way to provide a 40-minute advance warning on major earthquakes (page 29). And in ‘Fair Weather Trends’ (page 32) we examine some of the ways trading firms can use weather data.
The Q3 edition kicks off with an interview with Haim Bodek in ‘First Person’ (page 10). Haim will be the first to tell you he has nothing against high-speed trading. His reform drive has more to do with little-known arrangements between HFT firms and trading venues.
Speaking of speed, Ion Asset Architecture’s Dennis Lohfert takes a close look at Eurex’s New Trading Architecture to see what it means for low-latency trading (page 16). And Eva Szalay finds out how FX venues are aiming to slow things down (page 50).
Markets have been adjusting to the new French and Italian transaction taxes, but are they ready for a wide-ranging, cross-border FTT? We look at the implications of a European political campaign to tax vast amounts of trading activity (page 40).
While tax and regulation concerns have weighed heavily on the markets for some time, it’s also clear companies are constantly on the lookout to expand their trading opportunities. This has made distributed technology an important factor for intrepid firms; Anna Reitman examines the issues in ‘Tech’s Message’ (page 74).
Of course, we also have our regular line-up of popular columns. Algopedia looks at options algos, which are gaining momentum in the US and are now expected to become more widespread in Europe (page 62). In ‘Me and My Machine’, Dexia Asset Management’s global head of trading, Fabien Oreve, reveals his plans to ramp up the use of algos (page 68). ‘Dequantification’ investigates short-term return reversal (page 80). And is there such thing as a free lunch? ‘Software Review’ opens the bonnet to examine Quantopian’s offering (page 86), which Automated Trader profiled in the last issue.
Finally, you may have noticed the magazine looks a little different. With an eye to making it easier for you to find exactly what you’re looking for, we’ve revamped the design and streamlined some sections. We hope you like it.
- The CampaignerHaim Bodek, founder of Decimus Capital, talks to Automated Trader Editor Adam Cox about his campaign to shed light on the relationship between exchanges and a number of HFT firms.
- Battling the bottleneck: an analysis of the new Eurex platformDennis Lohfert, founder of Ion Asset Architecture, crunches the numbers to determine what impact T7, Eurex Exchange's new trading architecture, will have for latency-sensitive trading.
- Weather veinsSome companies will scour the earth for the right weather data to power trading strategies. Adam Cox reports on the business of weather information, a type of data that can play an enormous role for a host of markets.
- Seismic shocksWhen the earth moves in a big way, the markets can too. As part of our series on weather and seismic information, Automated Trader talks to a scientist who thinks he may have found a way to gain advance warning of major earthquakes.
- Fair-weather trendsAs computers grow stronger and meteorological models are refined, weather forecasts are improving. Anna Reitman reports on the ways weather data is being used in a variety of markets, and also why this source of information still has its limitations.
- FTT, HFT...WTF? Political pressure for a European financial transaction tax poses threatsAs European regulators and politicians try to find agreement on a broad-based European financial transaction tax (FTT) for some EU members, Automated Trader Editor Adam Cox looks at the implications if such a levy finally emerges.
- Life in the slow laneThe foreign exchange market is grappling with the question of speed. Eva Szalay looks at the implications of efforts to make currency markets slower.
- ETF Liquidity: Hidden DepthsA quick glance at the screen would seem to suggest that ETFs have a mounting liquidity problem. Not so, explains Gary Stone, Chief Strategy Officer, Bloomberg Tradebook. If you know where and how to look there is ample available liquidity.
- Of pits and puts: the case for options algosEva Szalay examines prospects for execution algos in the complex, liquidity-strapped options world.
- The world of electronic options trade, according to PeterffyA pioneer of electronic options trading, Thomas Peterffy has been described as a Wall Street legend. Peterffy answered a few questions from Automated Trader by email for our article on trends in electronic options trading.
- Me and My Machine - Step by stepBefore Fabien Oreve joined Dexia Asset Management two years ago, the group did not even use algorithms to trade equities. Now the total is 10%, and the plan is for that to keep rising. Adam Cox talks to Fabien, the group's global head of trading, about why he favours a slow-but-steady approach to automation.
- Exploring a distributed worldAnna Reitman speaks to a range of experts to get to the bottom of some of the more common issues that come up when trading firms adopt distributed computing systems.
- The Science of DefundamentalisationShort-term return reversal is a long-established phenomenon in financial markets. Yet despite this longevity, the challenge of isolating fundamental return drivers from their non-fundamental counterparts in a reversal model still persists. Automated Trader talks to Zhi Da, Associate Professor of Finance at the University of Notre Dame and author of a recent paper on the subject, about a novel approach to this conundrum.
- Utopian Quantopian?Quantitative strategy building and backtesting platform? Using an accessible, popular yet powerful programming language? Paper trading, plus (in due course) live deployment of strategies? Free!?! Automated Trader's founder, Andy Webb, and the Wrecking Crew check out whether Quantopian really is all it seems.
- Peek ahead: Now playing at a cinema near you...In the latest installment of Peek Ahead, we consider the long and sometimes uneasy relationship between markets and movies.