Automated Trader Magazine Issue 36 Spring 2015
You can bet on only one thing in today’s global markets. There’s going to be more electronic trading and it’s going to keep getting more sophisticated. What that means is an emergence of jurisdictions and asset classes ready to pull liquidity with ever shinier new offerings (and risk).
Our Spring 2015 issue takes a look at this emergence. First with a special report on the emerging markets – the BRICS – and how they are developing (page 12). We try to make sense of this dynamic and often contradictory grouping ready to do battle on their own terms in the face of major risks, both internal and external.
We put the spotlight on China, examining the new Stock Connect link and what it means for trading as part of the country’s renminbi internationalisation strategy (page 46). And if you’ve ever wondered what running a fully automated fund is like in mainland China, our buy side interview with QuantCore will give you some real insight (page 58). If it’s India you’re interested in, we have a bit of a teaser for more to come (page 52).
When it comes to protecting returns, emerging markets investment means hedging currency risk and the World Gold Council has some ideas about how you can do that (page 54). WGC’s director of Investment Research provides a summary of the industry association’s extensive research into reducing portfolio losses with gold.
But emergence isn’t just about emerging markets. It’s also a major theme across asset classes. In our feature, “Fixed Income on E” (page 24), Peter Barker finds an industry ready to apply the lessons of algorithmic trading. If you want the nitty gritty on what it’s like to connect to the platforms out there, founder of Automated Trader, Andy Webb, tests out corporate bond trading platform MTS BondsPro just for you (page 34).
Our regular buy side Q&A features Houston-based Quantlab (page 40), and some reminiscing with president Cameron Smith and CEO Bruce Eames on how far HFT has come, and how far it has yet to go in an era of increasing competition and regulatory scrutiny.
HFT regulation makes a lot of noise, but truth be told it is only a small file on regulators’ desks. Regulatory think tank JWG Group provides an update on the Paris MiFID II hearings, and all the other international rule-making you should be keeping an eye on (page 65).
We have a new regular feature, in which we select the “Best of the Blogs” (page 68). For this issue, we’re choosing a posting from start-up Inovance on building a machine learning strategy to detect patterns.
Finally, in Peek Ahead, we express our sincere appreciation to central banks for keeping us all on our toes with constant surprises (page 80).
- BRIC-layerSIt's been almost 15 years since the original BRIC grouping was minted, referring to Brazil, Russia, India and China, with South Africa getting tacked on in 2010. Much has changed in the world since then, and though the regions push forward with cooperative arrangements among themselves, there is a big question mark over the relevance of these emerging markets as a group. Automated Trader tries to stitch together the macro and micro realities.
- Automated Trader talks to Pavel Vidov, head of trading at IntrastAutomated Trader talks to Pavel Vidov, head of trading for Russian proprietary trading firm Intrast, founded in 1992.
- Automated Trader talks to Bruno Trigo, head of electronic trading at XP InvestimentosAutomated Trader talks to head of electronic trading, Bruno Trigo, at XP Investimentos, a broker and market maker on the Brazilian exchange.
- Fixed income on EWord on the street is that fixed income is lock-step behind FX and equities in terms of algorithmic trading. But there are some major hurdles along the way. Automated Trader takes a look.
- Praising the Modern MarketsQuantlab set up shop as a long-short statistical arbitrage hedge fund in 1998. Regulatory changes such as decimalisation in the early 2000s adversely impacted the firm's implementation costs and new execution strategies had to be found. That exploration led to Quantlab becoming one of the top HFT firms in the US.
- Making ConnectionsThe Hong Kong Shanghai Stock Connect is a significant step forward for Chinese markets, and a move in a larger strategy for China to open up its capital account and to internationalise its currency, the renminbi, writes Peter Barker.
- Hedging EM? Think Gold.Attractive returns across emerging markets (EM) for most of the last decade - supported by economic growth -appealed to many investors. While the long-term view on EM is still positive, economic weakness in some EM regions and increased volatility in most EM currencies has increased the importance of sound portfolio risk-management strategies. Our analysis shows that gold can be a cost effective EM-currency hedge, helping investors reduce portfolio losses during periods of heightened risk.
- India RisingWhile high frequency trading levels in Europe and US seem to have plateaued, the converse is true for developing markets. At the same time, there is a shift in priorities, namely that it is no longer simply about scraping off microseconds. And while India's economy, along with investment interest, seems set for growth, its markets are adapting and preparing. Anna Reitman and Priyanjana Bengani report.
- QuantCore: Little fund in Big ChinaMartin Lockstrom is a Swedish national operating a quant fund out of Shanghai - a choice he made with his family after falling in love with the country from his days as an academic in the region. Automated Trader talks to him about the opportunities and technical realities of starting a little fund in big China.
- JWG regulatory trading digest - The end of the beginning: conclusions from ParisThis month, ESMA hosted a broad cross-section of market participants for a final 'hearing' on the MiFID II technical standards they will send to Brussels for approval this summer. Of course, many attendees were surprised to find that, while they were en route to Paris, another 355 pages of MiFID II technical standards consultation were issued for comment by 20 March.
- Best of the Blogs - AI, machine learning, data mining, and big dataArtificial intelligence, machine learning, data mining and big data seem to get thrown around in everything from business intelligence to financial services. Artificial intelligence is used where machine learning should be and machine learning is often confused with data mining. In this post Justin Cahoon, co-founder and COO of Inovance, aims to clarify these buzzwords, explore how they apply to trading and then explore an ideal subcategory of data mining for traders.
- Peek Ahead: Surprise! It's the central bankCentral banks are full of surprises. Remember when Switzerland's central bank unpegged the franc from the euro? You might have seen a little news story about it here and there. The euro and USD plunged almost 30% against the franc immediately after, causing chaos in FX markets around the world.