Automated Trader Magazine Issue 34 Q3 2014
If there’s any group not particularly frazzled by constant revelations of phone tapping and metadata’d emails, it’s probably traders. Few professions are subjected to such sweeping surveillance and storage of communications. And the risk office keeps pushing out front. A trader once told me, under the watchful eye of public relations, that he doesn’t breathe near a client unless compliance is sitting next to him. It’s a change he felt everybody had just better get used to. That presence is equally close in the digital sense.
We check out the way digital eyes watch markets in ‘State of surveillance (page 18), examining how technology is being used to analyse market behaviour. We found that human systems have yet to catch up to technological ones.
Of all the market surveillance topics, cyber security (page 26) kept coming up as the next big thing that could blind side the financial industry. Every corner of the market is preparing for an attack that most experts consider inevitable. But where does automated trading fit in?
We’re also happy to catch up with Tradeworx’s chief technology officer Mike Beller (page 12). The hedge fund’s tech unit works with the US markets regulator, the Securities and Exchange Commission, on what some critics have considered
a controversial public-private partnership for surveillance in equities markets. He addresses the issues and talks about the challenges of maintaining an ultra-low latency, super-high frequency trading edge.
In Europe meanwhile, algorithms are under scrutiny thanks to the German HFT act. Rochelle Toplensky takes a look at whether the rest of the European Union will adopt similar rules within the MiFID II legislation (page 52).
Just as the European Union struggles to fulfil the vision of a single market, so too does the Association of Southeast Asian Nations (page 34) watch and learn in hopes of boosting its own collective investment potential. Sophie Lewisohn talks to people invested in the future of this region, expected to be a major area of high growth potential.
First person (page 43), our regular feature highlighting a small buy side firm, interviews the team of QLO Capital, a systematic trading fund ready to ride the wave of recovery in the CTA space.
And we’re pleased to introduce some thoughts and wisdom directly from our brilliant friends at think tanks. JWG Group takes us on a trip around the world of changing regulations (page 32), while the Thalesians’ consulting quant Saeed Amen turns up the ‘vol’ on FX (page 49).
Finally, Peek Ahead (page 68) delves into all the gossip about trader chat. Goldman’s taking on Bloomberg, and ‘anonymous source’ seems to be babble-ing about it everywhere.
- Trading that worx - Mike Beller, CTO of Tradeworx, talks about the ultra-highs and lows of trading and techMike Beller hadn't expected to end up in financial services, having started in telecom early on in his career. Feeling that the research and analysis side of telecom was a bit of an echo chamber, Beller decided it was time for a switch. He eventually landed at Tradeworx, ultimately becoming CTO of the firm and its infrastructure affiliate, Thesys Technologies.
- State of SurveillanceWhat does watching the global markets mean for regulators and traders in the 21st century?
- Spotlight on: Cyber securityCyber security is one of the hottest topics in market surveillance, but what is the threat to the automated trading community? Experts and authorities are warning the financial industry to prepare for a reality of persistent cyber threats. Historically motivated by theft, there is also an emerging and alarming political dimension to cyber crime.
- JWG regulatory trading digestRecord fines have been dominating the headlines in the US, as the federal government appears to have finally hit the brakes on Dodd-Frank rulemaking. In July, BNP Paribas reached an $8.97 billion settlement with the US Justice Department (that also took it out of the market for 12 months) for breaching sanctions on Sudan, Iran and Cuba. However this was subsequently dwarfed in August as Bank of America agreed to pay a cross-jurisdictional record fine of $16-17 billion for mortgage related misconduct in the run up to the financial crisis.
- Kinks in the wire: Asean integrationAsean integration approaches next year, but a fully linked-up financial system will be several years in the making. Sophie Lewisohn hears about new initiatives between exchanges and what still needs to happen for trading to take off.
- The Rise of the Asian SuperbrokerAs the global banks grapple with tides of regulation, fines and a myriad of other post-crisis issues, local Asian institutions are tooling up and stepping in to fill the gaps. The "Asian superbroker" is emerging and catching up with the big guys.
- Consistently Fast Java: a Business Real-Time RealityWhile Java has plenty of virtues, jitter has been a long-term blot on its reputation. However, this is an issue specifically targeted by Azul Systems' Zing Java Virtual Machine (JVM). As Gil Tene CTO of Azul Systems explains, solving this problem means that business real-time Java performance is now genuinely comparable to languages such as C++. Add in memory layout refinements that Azul is proposing for Java's next version, and the case for using it in latency-sensitive trading applications becomes compelling.
- Riding the momentum. Trials and joys of setting up a systematic trading shopSince starting in the securities industry almost 20 years ago, Lars Wind has seen a number of crises come and go - the Asian crisis, dot.com bust and the global financial crisis notably. He's worked all over the world developing bespoke strategies, ultimately coming to London to start up his own fund QLO Capital.
- Turning the vol up on trading FXWhen it comes to equities, it seems fairly easy to define a beta for the market. Typically, we might think of S&P500, as a good approximation for what a typical equity investor's return might be. Indeed, there are many passive investors who follow funds which directly replicate S&P500. For bonds, we can do something similar if we pick an index such as Barclays Global Aggregate bond index.
- Germany leads, EU follows?Germany's HFT Act has had implications for how the European Union is managing legislation. Intended to provide trade surveillance and identification of light speed traders, the legislation faced a bumpy ride initially. As financial markets watchdog ESMA crafts the MiFID II reforms, the industry is responding to attempts at harmonisation, putting the mechanics of the Act front and centre. Rochelle Toplensky examines the evolving landscape.
- Anonymous insiders love to gossipHas there ever been a story with more anonymous sources than the recent leaks about Goldman's bid to oust Instant Bloomberg?