Building and maintaining an algorithmic trading tool

Issue 04 January 2007
Automated Trader Magazine

As the use of algorithmic trading tools has become more widespread, clients’ expectations have similarly increased. Owain Self of UBS highlights the important considerations when developing and supporting a credible algorithmic trading tool and what it takes to maintain that credibility in a constantly changing market.

Owain Self

Owain Self, Executive Director, European Algorithmic Trading, UBS

In the fledgling days of algorithmic trading it was possible to buy or to build a system on a very affordable basis. But, as usually happens, it was not long before the realisation hit that you would get what you had paid for. Clients’ expectations have since changed.

The initial frenzy among broker-dealers to have any kind of algorithmic capability within their portfolio of trading tools, regardless of the robustness or performance of the system, has given way to an increased level of circumspection. And those providers that were offering affordable but less effective systems have been found out.

In today’s markets, clients are looking for performance, flexibility and reliability – attributes which require an investment running into the tens of millions and a worldwide team of people that exceeds 100. This realisation has limited the market to a select and credible group of five to six major, global broker-dealers who are willing to make this investment in technology and expertise. But what does it take to reach that elite group of providers, how should that investment be spent and what work is needed, in a trading discipline where performance and capability must constantly be improving, to maintain a position at the top of the algorithmic trading table? ...