Top stories

JPX taps Cinnober for Risk Monitoring

Apr 28, 2016

JPX, one of the world’s largest financial marketplaces, has chosen Cinnober for risk monitoring across the entire Japanese market of equities, bonds, futures, options, CDS and IRS. This follows an announcement earlier this year where JPX selected Cinnober for the clearing of the exchange’s listed derivatives market.

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Pontus Networks release Zing Edition of Thread Manager

Apr 28, 2016

Azul Systems (Azul), the award-winning leader in Java runtime solutions, and Pontus Networks, a specialist in improving the performance of software in financial institutions, have launched an Azul Zing®-based edition of PontusVision Thread Manager (PVTM), Pontus’s flagship product which reduces capital and operational IT infrastructure expenditures by improving the way software threads run on specific CPU cores. In a recent benchmark study, the combination of Zing and PVTM helped an investment bank improve the latency of its FX pricing system without changing a single line of code, by reducing the pricing system’s peak latency from receipt of a raw market data tick to sending a FIX market data snapshot to clients by 20X.

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Computershare and SETL demonstrate Australia’s first working blockchain solution

Apr 28, 2016

Computershare (CPU:ASX) and SETL have today demonstrated Australia’s first working blockchain solution at Computershare’s annual Investor and Analyst day. The two companies are also pleased to announce a joint initiative to establish securities ownership registers using blockchain technology. Computershare is the globe’s leading provider of share registrar and receiving agent services to issuers and plays a crucial role in maintaining accurate and complete records of securities including both dematerialized and certificated ownership.

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Latest Blog Posts

Pair Trading: It’s Complicated – Part II

Mike Baradas, Bloomberg Tradebook

Apr 27, 2016
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Pair and cross-asset algorithms seek market neutrality by using correlation as a key factor to managing multi-security executions.  In our previous post, “Pair Trading: It’s Complicated – Part I,” we differentiated the parameters of cross-asset algorithms from standard single-stock or list algorithms. We will now explore the inner-workings of these pair algorithms in more detail. To do better than the current market: buy lower in one leg, and/or sell the other leg higher, the algorithm needs to do better than just sending market orders in both securities.  Put simply, a Buy market order executes at the opposite side ask price, or a Sell market order executes on the bid price (Figure 1).  Execution can be improved by trading from their respective sides (buy on the bid, or sell at ask) to somewhere between the bid/ask spread (Figure 2). Pair and Cross-Asset strategies are contingent orders.  Meaning, certain parameters must exist for the individual security and between each security, for the algorithm to execute.  The first parameter of a pair algorithm is the relative price value between two or more securities.  This relative price value is the trigger that starts the pair algorithm working.  However, a pair algorithm needs to do better than just sending single orders to the market, the algorithm also needs to: Execute inside the bid/ask spread for each order, Sequentially execute two or more orders that capture or improve the relative price execution between each security, and Execute the required number of shares for each leg on a pro-rata basis We can illustrate by using the show leg and anchor leg concept of pair algorithms. A show leg is the first order sent at a price defined by the relationship between the two securities, and the marketable anchor price.  A sequence of events would be: The Show leg Buy order will post on the bid side, or pay the ask to get filled After the Show leg Buy order is filled, then the Anchor leg Sell order is sent to be filled Repeat Let’s take an example (Figure 4): Buying Sanofi [SAN FP] and Selling Bayer AG [BAYN GY].  The spread that we would like to capture between the two securities is €32.05 or better (BAYN GY price – SAN FP price = €32.05). Given the displayed BAYN GY Bid price of €110.75 for the Sell Anchor leg, we can pay up to €78.70 for SAN FP (€110.75 – €78.70 = €32.05).  The algorithm could start with a passive Buy order for €78.63(a) in SAN FP, then move up each price level (b, c), until ultimately paying €78.70(d) that would still capture the €32.05 spread we wanted.  Starting the Show leg on the passive side allows for price improvement in the execution. Size is another important parameter for pair algorithms (Figure 5). To be able to execute a relative value trade, volume must be available for each security.  Let’s assume we want to execute the same number of shares for SAN FP and BAYN GY.  If there are only 500 shares displayed on the bid side for BAYN GY (Anchor Leg), then the algorithm will only post an order to Buy 500 shares of SAN FP with the Show Leg. Traders using the Bloomberg Tradebook PAIR Multi-Asset platform (Figure 6) can execute these strategies and control the parameters we have described. After defining the strategy and entering the order details, the trader then applies their spread limit and order size controls to activate the strategy. In our next installment of this series, we will provide the comprehensive electronic solutions available to integrate the Bloomberg Tradebook PAIR Multi Asset platform with your EMS and OMS workflows.    
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CFTC keeps source on the menu

Henri Pegeron, Fidessa

Apr 18, 2016
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Open commentary for Regulation AT is now officially over, and while the CFTC mulls over the mostly cautious responses there is some time to reflect on how best to prepare for enforcement of the rules. However, the loftiest piece of proposed legislation in the carte de jour isn’t about futures or traders at all, but the underlying source code of the systems associated with them, which the CFTC sees as a business record under its jurisdiction. The regulation is proposing that ‘AT Persons’ maintain a production source code repository for their trading systems that can be accessed under the same guidelines as the existing rule 1.31. That is to say, the source code must be “readily accessible” on the menu for two years, and available from the specials board for up to five. A code repository is a critical part of any valid software development lifecycle, but trading platforms will now have to worry about the security and privacy of their intellectual property in addition to implementing safe and efficient coding practices. It is unlikely, and possibly distracting, to assume that the underlying code alone will be the reason something went wrong. This is especially so in the modern age of algorithmic development where success is measured on ability to learn and adapt to market conditions. Case in point, the CFTC will need to ensure they look at the entire menu in order to analyze any algorithmic trading event before ordering source. The focus on intellectual property should be based on more than mild curiosity given the potential cost to the industry of preparing the dish.
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Blockchange - a look at the evolving nature of Canadian trading

Doug Clark, ITG

Apr 18, 2016
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Canadian markets have been seen as an upstairs block market, where the big five banks dominate. But relative market share for block trading has ebbed steadily in the past few years, and recent structure changes have transformed the nature of downstairs markets. The chart below tells the real story of the evolving Canadian market. In late fall 2015, as oil prices fell, dealers pulled back capital and the inverted venues took hold. Canada’s share of interlisted volumes saw a near step function increase. Our report says that foreign participants should no longer feel like outsiders, trading at a disadvantage to those “in the club.” Rather, they can view their global experience as an edge in navigating the Canadian markets. The more trading in Canada evolves, the more we must realize that trading matters. We invite you to read the full report here.
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Interview

EZE Software's Adam De Rose talks about front-office reactions to regulatory challenges

Apr 19, 2016
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Talking from TradeTech Europe 2016, Adam De Rose, Associate Director Institutional Sales discusses how Eze Software Group is aiding the front-office in meeting regulatory challenges, particularly around MiFID II.

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Robert Powell talks to ATMonitor about upcoming trends in communications and technology

Apr 18, 2016
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Talking from TradeTech Europe 2016, Robert Powell, Director of Compliance at IPC tells us how the marketplace is evolving, particularly around compliance and the upcoming market abuse regulation (MAR). Powell discusses advances in biometrics, including using voice print and facial recognition to access telephony and data systems.

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IPC’s Robert Powell discusses the company’s new strategy and expanded focus on compliance

Apr 14, 2016
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Talking from TradeTech Europe 2016, Robert Powell, Director of Compliance discusses IPC's new strategy and expanded focus on compliance, including how the business is preparing clients for upcoming market regulations.

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Survey

Algorithmic Trading Survey 2016 - Hedge Funds

Trading Survey The TRADE magazine in conjunction with ATMonitor, is once again running its industry leading survey of Algorithmic Trading Services. Now in its 9th year running, we invite Hedge Funds to comment on their use of electronic trading services and to rate their algo providers. Please rate your algos by completing the online questionnaire available here

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Research

Counter (party) intuitive

Fidessa

Apr 05, 2016
Counter (party) intuitive

Pressures from all sides are driving buy-side firms around the world to pay ever-closer attention to counterparty exposure. Asset managers are looking critically at their existing processes for monitoring and controlling counterparty risk and often finding them to be inadequate. Here Steven Strange, Compliance Product Manager at Fidessa, looks at how the counterparty landscape has changed for the buy-side, and what can be done to ease the burden.

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Video showcase

Corvil working with RSJ

Corvil Watch Michal Sanak, CIO, RSJ Algorithmic Trading discuss working with Corvil. read more

Corvil working with Tradition

Corvil Watch Yann L'Huillier, CIO, Tradition and Alex Krovina, CTO, Tradition discuss working with Corvil. read more

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