Neotick Market Insights

Saturday, March 3, 2012

Data Warehousing, Storage and Analytics

Neotick provides multiple solutions to support these technologies and needs:

Very large scale, on-site and Cloud based data warehouses.
Data mining, cube modeling, data analytics, pattern recognition and predictive modeling systems.
Intelligent 1st, 2nd and 3rd normal form database schemas for orders, executions, instruments and market data.
Very large scale, cloud based data warehouses for historical market data including depth of book archiving.
High availability, fault tolerant, clustered, replicated enterprise database architecture for maximum uptime.
File and in-memory synchronized storage solutions and technologies.
Leveraging Cloud Computing and Neural Networks to host very large scale enterprise wide analytical models in a services oriented architecture.

Blogged by Bill Faruki CTO, Neotick, Inc - bfaruki@neotick.com - www.neotick.com - +1 312 884 7604

Trade Flow, Market Data & News Feed Handlers

Exchanges, ECN’s, dark pools, crossing networks, algorithmic routes, market data feeds and news providers are popping up all over the globe. Complex securities, exotic products, rate based instruments, single stock futures and all sorts of other weird securities are now part of the global fabric of capital markets.

Connecting to, conducting business with and consuming data from all of the above, globally, is a major challenge for trading organizations. Combine this with the need to handle millions of market data messages per second, translate them, archive them and then re-distribute them.

Sending orders to and receiving executions from all of these global venues needs to happen at a very high rate of speed and in the most efficient manner possible all while you meet a very high standard of reliability and resilience.

Neotick knows this space very well and has delivered numerous solutions to these challenges. Some of our capabilities are listed below:

Trade order adapters to all global venues including exchanges, ECN’s, dark pools, crossing networks, algorithms and more.
Market data feed handlers to all global venues including exchanges, ECN’s, dark pools, crossing networks, algorithms and more.
Normalized news handlers and parsers to all major providers.
Hardware based trade order and market data handlers.
Hardware based FAST decoders using custom or FPGA technologies.
Hardware based implied engines and index calculators.
Venue latency “pinger” for fastest path order routing.
In-memory order book, order management, implied pricing engine.
Expertise with multi day session management, dynamic session calendars and round the clock session management.
FIX, FAST, FIXML and ITCH etc. protocol expertise.
Integration with major market data vendors such as Active Spryware, Bloomberg, Reuters, OPRA, DTN eSignal etc.
Integration with CameronTec, Appia, Fidessa, Onix etc.
Integration with Thompson Reuters, Bloomberg, Need To Know News (NTKN), Dow Jones, RapiData etc.

Neotick is your bleeding edge technology partner that boasts the most advanced technical capabilities, subject matter expertise and solutions customized to give you unparalleled edge in today’s world and the future of trading.

Blogged by Bill Faruki CTO, Neotick, Inc - bfaruki@neotick.com - www.neotick.com - +1 312 884 7604

Firm, Portfolio, Position, Order & Multi Asset/Currency Risk Management Solutions

In order to effectively manage and monitor the deployment of trading capital and stay on top of risk and exposure, modern trading firms must implement a suite of tools and solutions that continuously record, balance and aggregate your trades into more coarse views of your positions.

These views should be adjustable to look at your positions from the point of view of the firm as a whole, the particular trading desk, the trader generating the order, the beneficial account for the order, by the type of security, the security itself or any other number of combinations.

Once the position is known the risk associated with that position must be calculated in real-time. Exposure to various benchmarks and other thresholds must be identified and artificial intelligence must be employed to assist in very complex real-time computations so that an organization may be able to monitor, set alerts triggers, have advance warning of potential risks and then take the necessary automated or manual actions as needed to mitigate or hedge risk.

These risk systems should be intelligent enough to distinguish between the various types of asset classes and assets within a portfolio and normalize the various currencies these securities settle in to a consistent base currency.

Additionally trading firms should have the ability to play with “what if” scenarios and intelligently create and exercise stress test models so that they may be aware of potential weaknesses and address them.

Neotick builds these systems using these capabilities:

Complete real-time, client and/or server based, pre and post trade risk management and monitoring solutions.
Enterprise wide real-time multi asset class and multi currency risk analytics and portfolio risk systems.
Real-time, multi asset class, multi currency portfolio margining.
Firm wide, trader, account, instrument based, position, clip limits, daily drawdown, max loss, delta neutral, exposure, hedge based risk modeling and management.
Integration with turnkey vendor risk solutions.
Synthetic order and position management.
Emergency exit, portfolio-flattening, auto shut off systems.
Portfolio orchestration and tuning systems.
Portfolio currency base normalization.
Enterprise wide, multi asset class, order management solutions.
Order history reporting.
Trade reconciliation, aggregation and tracking.
Execution efficiency management and analysis solutions.
“What if” scenario modeling and stress testing.
Drill down risk analysis, identification and actioning.
Compliance monitoring, alerting and reporting solutions

Credential & Risk Profile Management Solutions

As organizations grow and risk and exposure become an increasingly crucial part of managing your business, your business challenges exponentially increase.

Enterprise trading platforms now require multi layered security protocols, diverse and scalable configurations and must integrate with existing credential management systems.

Risk controls now require very complex rules, tiers, templates, computation and analytics. These controls execute in real-time and in parallel with other systems to ensure the financial integrity of the organization.

Neotick can help you design and build these solutions with the following capabilities:

Enterprise wide, fully integrated security, authentication and credential management solutions.
Real-time, credential and risk profile refresh management solutions.
User friendly, intelligent, profile management interfaces.
Dynamic, push based credential and risk profile updating.
Fully integrated custom solutions with turnkey vendor based solutions.

Order Routing, Execution & Security Master Solutions

Given the current availability of liquidity providers, their incentive programs and product offerings, routing to the right venue has become increasingly important and in some instances is a critical process for an efficient trading platform.

Combine that with the need to execute large list orders and block orders with minimal market impact and simultaneously monitor and manage the execution efficiency of your orders, you are now faced with a new challenge.

Now add to that challenge the growing number of liquidity venues, their growing number of product offerings combined with the potential for infinite permutations of derivative securities, drives a mission critical need for a robust, intelligent and efficient security master solution.

Neotick has solved these challenges with custom solutions for the industry that include:

Rules based, configurable, prioritized order to venue routing solutions.
Venue and rule based order validation.
Smart order routing to exchanges, ECNs, dark pools and crossing networks.
Buy side to buy side order blotters, order books and crossing solutions.
Internal blotter, order book and crossing solutions.
Sell side liquidity aggregators and best price execution management solutions.
Complex, rules based, quantitative algorithmic execution management solutions.
Fastest path, smartest path, best rebate based order execution solutions.
Arrival price, volume, interval, age, average price, TWAP, VWAP, T-VWAP based execution algorithms.
Broker execution algorithms. Barclays, BB, CSFB, Knight, Edge, GS, ITG, Nomura, NYFIX, Pragma, Piper Jaffray, UBS etc.
Back test, simulate and execute innovative algorithms.
Multi leg execution, fill aggregation and average price calculators.
Intelligent security master with interpreted derived instrument modeling.
Multi asset class, third normal form, security management databases.
Support for the creation of synthetic instruments.

High Speed & High Throughput Messaging Fabric

Today’s financial markets data volumes, latency, reliability, resiliency and routing demands are pushing the very boundaries of software and hardware technology.

Additionally the need for reliable, fault tolerant, high availability services that span a global infrastructure of producers and consumers is fast becoming the norm for financial applications at an enterprise level.

Optimized, ordered, reliable, secure and routed delivery of messages produced by services to be consumed by services in the fastest and most efficient possible fashion is the very heart and soul of a robust, scalable, efficient and effective trading platform.

Neotick has always understood this and has built numerous generations of such messaging fabric. Our capabilities are unmatched is this area.

Ultra low latency, very high throughput messaging bus.
Point to point, universal and targeted broadcast messaging.
Emergency and administrative messaging and notification.
Reliable, ordered, router traversable, optimized multicast messaging.
Encrypted, compressed and shortest path messaging.
Topic based, publish and subscribe messaging.
Wide area network multicast forwarding and consumption.
Message routing algorithms to support millions of messages per second.
Routing and queue congestion management algorithms.
Custom socket adapters and kernel bypass technologies.
Protocol mapping to support fanning, distribution and traversal of layered networks.
Dynamic traffic shaping and routing.
Producer/Consumer auto-discovery and QoS management.
In and Out of process communication capabilities.
Large block data streaming technologies.
Architect and build high availability, fault tolerant, distributed, SOA based enterprise solutions.

Algorithmic, Quantitative, Order Generation & Market Data Consumption

The modern day trader must be able to consume, process and compute hundreds of thousands to millions of market data messages per second and then identify various opportunities to capture alpha while, almost instantly, submit very simple to the most complex types of orders to a vast array of venues with complex order and execution logic.

These complexities heighten the demand for quantitative and algorithmic, intelligent trade order producers and market data consumers and processors.

Now enter the world of automated trading.

You could simply need to compute a spread price between two identical securities, imply a price for a more complicated multi-leg spread, compute a weighted index consisting of a basket of securities or take it to a whole different level and mathematically infer fair value pricing based upon the price behavior of thousands of component securities on both the implied bid and implied offer side and you need to do all of this in real-time, tens of thousands of times a second.

Once computed and fairly priced you need to simultaneously transmit one or more orders to one or more venues with complicated order parameters, modify each of those orders as necessary and automatically, possibly hundreds of times per second and manage the rapid inflow of acknowledgements, rejections and executions. Simultaneously updating your true position, calculating your exposure and risk and thinking about how to the hedge your position with a plethora of correlated and non-correlated securities each priced and valued differently.

Additionally you need to know exactly where your breakeven targets are, compute profit targets based upon a set of fuzzy rules and dynamically set exit thresholds and then act upon these exit criteria automatically.

A human simply cannot do this.

Neotick can build those automated solutions for you to include:

Complex order, contingent order and other custom order types.
Order queuing/caching, timed release.
Intelligent, multi leg, multi asset class spreaders with tick inference.
Complex, multi leg, composite instrument automated quoting systems.
Book stackers, order book queue managers, market making systems.
Intelligent option volatility modeling systems, Greek based quoting systems.
Mass modeling, correlation modeling and mass quoting systems.
Pure and statistical arbitrage, multi asset class, black and gray box systems.
Hardware based quantitative modeling, mass pricing engines.
Intelligent, multi asset class, multi currency, broker neutral, algorithmic API.
Embedded standard indices and custom indices calculators.
Embedded delta, correlation and position based hedging models.
Event arbitrage, corporate action and news based algorithms.
Trend based, pairs, sector based, delta neutral, mean reversion, scalping, rebate, large order “pingers” and basis algorithms.
Back testing, live simulation and machine learning to improve algorithms.
Leverage Neural Networks to distribute mass computational models.
Leverage Cloud Computing to host very large-scale analytical models.
Leverage Social Media for sentiment gauging and predictive modeling.
Advanced data mining, pattern recognition and statistical analysis.

Advanced Desktops, Visual Analytics and User Experience

As the number of liquidity venues has grown and become more complex, the number of securities available to trade has grown exponentially and the resulting market data has reached unprecedented volumes.

The types of securities have become more complex and trading these securities has become more complicated and requires more advanced user interfaces to manage the trading of these securities efficiently.

The vast amounts of market data now available requires analytical capabilities not commonly found in most existing systems and requires unique and innovative ideas and creative thinking when it comes to rendering all this data efficiently to the screen.

Trading or auto-trading now requires innovative tools and toolsets that are built with the trader in mind.

Neotick has a tremendous amount of deep knowledge building such custom and intelligent interfaces and knows how to deploy them with the greatest of ease and simplicity.

Some of our expertise in this area is:

Advanced custom desktops.
3D user interfaces leveraging virtual worlds and camera technologies to maximize screen real estate.
2D, 3D data analytics, heat maps, scatter plots and advanced visualizations.
Thick and thin real-time user interfaces.
Zero touch, web delivered, real-time, thick client, rich interfaces.
Advanced rendering technology to eliminate screen "lock up" and freezing.
GPU offloading to maximize visualizations and minimize resource consumption.
Advanced market data display widgets to better visualize patterns with.
Unique position, execution, order drill down grids to better manage orders with.
Advanced charting, chart overlays, spread charts and chart based click trading.
Multi dimensional chart plotting and an extensive analytical indicator library.
Integrated latency and throughput analysis widgets.
Alerting, notifications and messaging.
Expertise with rendering massive amounts of data with speed and efficiency.
A reusable and extensible library of user interface components that grow with your needs.
Unique position management and monitoring interfaces with analytical add-ons to support early warning, alerting emergency management actions.

Custom Solutions by Neotick

With many years of custom software development, we have amassed a vast and deep wealth of intellectual capabilities in all aspects of capital markets technology. By leveraging our domain expertize you can significantly reduce research and development timelines, increase quality and time to production while dramatically reducing overall development costs.

Regardless of your individual perspective to the markets, buy side or sell side, institutional or retail, agency or principal, HFT or large block, equity, options, futures, fixed income or forex, we are your single technology partner and only solution provider you will ever need. We understand, design, architect, develop, test and deploy the entire stack. From algorithmic black box models to the market data and trade order adapters and everything you will ever need in between.

Our expertize in building displays, algorithmic systems, API’s, pre/post trade risk systems, messaging frameworks, OMS’s, EMS’s, SOR’s, Exchange Adapters, Rules Engines, CEP systems, Position Management systems and anything else you can imagine means that we can get you to where you want to be faster, better and cheaper than any other technology partner you have considered.

At Neotick we can deliver your solutions using a variety of approaches, technology and methodologies.

We can build it from scratch, custom and specific to your needs.
We can integrate your existing systems and address your needs with custom solutions.
We can advise you on and mix n’ match turnkey, off-the-shelf vendor solutions to get you to where you want to be.
We can build for Linux, Sun, Windows, CUDA, iOS and other platforms.
We can build it with C, C++, C#, Java, Objective-C or any other language you think or we advise you that you need.
We can “put it on a chip”, build trading “devices” and squeeze out nanoseconds if speed is what you need.
We can build it in a distributed high availability, fault tolerant architecture that leverages commodity hardware and guarantees availability.
We can build your systems so that you save money, control risk and increase alpha.

All Neotick custom solutions can be built to provide ultra low latency and extremely high throughput while being highly available and fault tolerant. Software based solutions can be architected and engineered to be embedded into hardware devices minimizing latency down to the nanosecond and increasing throughput to tens of millions of transactions per second. Database driven solutions can be built to leverage clustered, replicated and geo-diverse solutions maximizing 24/7 availability and providing a fully fault tolerant architecture.

Neotick will advise you of and work with strategic proximity hosting solution vendors to co-locate your Neotick custom solutions so that you may leverage the shortest possible path to an execution venue.

The Neotick Solutions Capability Suite is categorized as follows:

Advanced Desktops, Visual Analytics and User Experience.
Algorithmic, Quantitative, Order Generation & Market Data Consumption.
High Speed & High Throughput Messaging Fabric.
Order Routing, Execution & Security Master Solutions.
Credential & Risk Profile Management Solutions.
Firm, Portfolio, Position, Order & Multi Asset/Currency Risk Management Solutions.
Trade Flow, Market Data & News Feed Handlers.
Data Warehousing, Storage and Analytics.

Thursday, April 14, 2011

Reducing Technology Costs with Standardised Platforms - by Intel

Bill Faruki interviewed by Nigel Woodward, Global Director of Financial Services, Enterprise Solution Sales, Intel Corporation

http://www.hyperrig.net/pdf/bkgTechTradeLCJune09.pdf

Neotick is your bleeding edge technology partner that boasts the most advanced technical capabilities, subject matter expertise and solutions customized to give you unparalleled edge in today’s world and the future of trading.

Blogged by Bill Faruki CTO, Neotick, Inc - bfaruki@neotick.com - www.neotick.com - +1 312 884 7604

Wednesday, April 13, 2011

High Frequency Trading & Algorithmic Trading

High Frequency Trading has been hitting the headlines more and more over recent months. Why? Because it involves huge sums of money and more than a little intrigue.

It first came to the attention of the public when an ex-Goldman Sachs trader was accused of stealing the firm’s proprietary code for an algorithmic trading system, a system that was able to generate multiple small profits by systematically trading electronic markets at lightning speed, in effect a goose that could potentially lay golden eggs day in and day out.

When high frequency trading came to light amongst the chattering classes, it immediately caused a furore. Accusations of market manipulation and even illegal practice flew left, right and centre. Why, asked the more vocal members of the investing public, should we be disadvantaged just because our brokers and fund managers don’t have the same sophisticated trading algorithms and market access speed as the big proprietary trading firms?

These sorts of questions are being increasingly asked and they don’t seem to be going away. As a result, a number of proposals are now on the table to see if the playing field can be leveled to assuage the clamour of the investing public.

Exposing the Myths
However, there are many misconceptions and misunderstandings about high frequency trading. The tendency amongst many is to take a somewhat simplistic view, a view that high frequency trading is nothing more than a sophisticated method of “front running” the markets. The purpose of this article is to explode some of the myths and to present a more balanced viewpoint by exploring the topic of high frequency trading in more detail, investigating what exactly it is and how it works.

The Algorithms Behind High Frequency Trading
Behind any high frequency trading strategy is a set of algorithms, usually developed and programmed by highly paid computer boffins at proprietary trading firms. The terms algorithmic trading and high frequency trading have now become somewhat synonymous, although they do not actually mean the same thing.

These algorithms used for high frequency trading take into account a range of criteria to determine when and where to trade, including: the price of a security; the size or liquidity available; various timing considerations (e.g. how quickly can an order be executed, or when exactly should orders be placed to ensure the strongest chance of execution); how likely an order is to be filled (the “fill ratio”); and the overall costs of each transaction.

All of these factors are taken into consideration when firms are developing and deploying trading algorithms and each individual factor can have a significant impact on the overall profitability of a firm’s high frequency trading strategies.

Price and Size
The factors of price and size are closely linked, because together they determine liquidity. Price is obviously one of the most important criteria because it is always advantageous to execute at a favorable price. But if you are only able to execute a small amount at that price (i.e. if the liquidity is not there) then any potential profits will be limited.

Time
For most algorithmic trading strategies, time is also an key factor. Speed of execution is for example hugely important with high frequency trading, because the faster you can get your order into the market, the more chance there is you will be able to hit a quoted price. But algorithm timing itself is also an important factor. Many algorithms take into account the timing of when big buy side orders are likely to be in the market (many buy side order are executed towards the end of the day for example).

Accordingly, a number of algorithms incorporate a TWAP (Time Weighted Average Price) component, to calculate the average price of execution across a specified time range (e.g. the last hour of trading).

Fill Ratio
The fill ratio is the percentage likelihood that an order will be executed. Many algorithms use statistical analysis and historical benchmarks to calculate the fill ratio percentage and some algorithms will even guarantee that their fill ratio will be above a certain level (e.g. 50%).

Transaction Costs
The full costs of performing a transaction also have to be taken into consideration with any algorithmic or high frequency trading strategy, because if those costs are more than the profit per transaction, then the algorithm will be unsuccessful (either that or it will need to be adjusted or fine-tuned). These transaction costs take into account not only transparent items such as fees, commissions and taxes, but also estimated “latent” costs such as opportunity costs, price movement during execution, fluid bid/ask spreads and a multitude of other intangibles and “moving targets”.

Aggression & Stealth
The algorithmic trading program itself takes into account the above five criteria and determines the execution criteria, whether passive or aggressive, and whether any kind of order slicing or waving is to be used.

The more aggressive strategies will generate market orders to hit existing bids or offers, enabling them to absorb liquidity at a given price. Passive strategies on the other hand, will generate limit orders either joining the current bid or offer, or a number of ticks below or above the current spread.

Slicing and waving is the practice of splitting a large order up into smaller chunks and releasing those chunks into the market at specified intervals or “waves”. If those waves have any kind of random element, they can allow the trader to operate in a kind of stealth mode, releasing the order into the market without tipping his hand to other traders or investors, who might be watching for the large orders coming through.

Conclusion
All of the above elements are key to running successful algorithmic trading strategies. And if these strategies are being run at high frequency (i.e. multiple orders per second), additional factors around speed and latency also have to be taken into consideration, from both a pure computer/data processing and a market connectivity standpoint.

High frequency trading firms invest huge sums not only in developing their algorithms, but also in putting in place the necessary infrastructure to ensure speed of execution. But as it only takes one rogue algorithm to reverse all those profits, it is a risky game.

Neotick is your bleeding edge technology partner that boasts the most advanced technical capabilities, subject matter expertise and solutions customized to give you unparalleled edge in today’s world and the future of trading.

Blogged by Bill Faruki CTO, Neotick, Inc - bfaruki@neotick.com - www.neotick.com - +1 312 884 7604