Marketcetera Platform Blog

High-frequency trading (HFT) could use a good image consultant.  Everyone from Floyd Norris to Chuck Shumer have questioned the validity and even legality of high-frequency strategies, as they have taken over from exchange floor specialists as the mainstream media’s favorite whipping boy.

Unfortunately HFT is a term like “salad” where there are many definitions, and no one covers the entire set.  We define HFT as high-speed, high-volume, low-latency trading enabled by technology. It’s what the Marketcetera platform enables and it’s all about responding quickly to inefficiencies in the market..

It’s also unfortunate that the media have helped conflate HFT with a couple of other trends that have given it a bad name. The practice of flash orders — for example, giving order floor access to a limited number of market participants, which I would argue isn’t good for the market structure — for example, is being twisted up with HFT in some news stories, coloring it an unfair advantage.  It’s true the same technology can enable HFT and trading flash orders, but the two are not equivalent.  There are many high-frequency strategies that operate outside the limited number of venues providing flash orders.

A second issue conflated with HFT in recent discussions is the apparently large profits generated by banks that a) have taken TARP funds, and b) have produced significant returns based on HFT.  HFT has been identified as a government-funded unfair advantage that the big banks have over the individual investor.

I don’t buy it.

Whenever inefficiencies can be removed, it’s constructive to the market. That to me is a fundamental principle of capital markets. And while it’s true that the larger banks are more likely to have the technology budgets to develop the infrastructure to support HFT, the playing field is leveling quickly.

Bear with me for a marketing message: because Marketcetera’s trading platform is open source, it is cheap, fast and flexible. Our new offering in partnership with NYSE will provide a managed service version of the Marketcetera platform right there in the exchange’s data center, allowing for the same kind of low-latency trading that the big banks, who have paid to park their servers their too, are building strategies.

The point is, technology is evolving and Wall Street is changing. HFT is no longer going to be a tool for the elite few. The analogy we like to use is the racetrack where all drivers have the same car. Once the advantage of the machine is removed, the best driver wins.

As we continue to come out with new screencasts available on our YouTube channel, you may be wondering what inspired me to start this project and what you can expect in the future. In the past few years, I’ve found various videos and demos on Ruby on Rails quite useful and informative. Ruby is the main strategy scripting language supported by the Marketcetera platform. Being able to watch coding and development in action allows you to understand concepts and applications of the language more easily and I knew we had to do the same for our community at Marketcetera.

In the past few weeks, we’ve started with three basic videos: the first screencast describes developing simple strategies in Ruby on Photon, the integrated Strategy Studio. The second screencast shows how to deploy a number of real sample strategies. The third screencast is a demonstration of the Strategy Agent, which allows users to scale strategies to work on multiple machines and handle complex data flows between strategy modules. Future screencasts will include more complex topics and trading strategies. For example, you may see a video on pairs trading and a demo on backtesting.

The goal for the video series as a whole is to provide Marketcetera users with audio-visual explanations for all the features and functions of the Marketcetera platform. We’ve been listening to your feedback so far. Keep it coming! You’ll help us determine the future direction of the videos.

Aite Group, a Boston research firm, reports that the high frequency trading community is now responsible for more than 60% of average daily volume in U.S. equities. High frequency trades are often executed with automated systems. Data volumes are exploding on Wall Street and the number of trades executed each year is increasing significantly. Traders and buy-side firms need technology to handle this fast-paced market. But what is automated trading and how does the human trader fit into the picture? At first glance, the word “automated” seems to eliminate the need for smart human traders and compel conformity in trading strategies. After all, if high-powered computers are doing everything and finding the perfect formulas, then what’s the use of even the best quant?

Read more »

Dow Jones Index Drop

The September 2008 market crash has certainly shaken up the trading industry.

For buy-side firms and hedge funds in particular, the volatile period over the last seven months has required difficult adjustments. The realities of a new market have challenged the assumptions inherent in hedging practices and federal regulations (such as the short selling ban) have forced firms to radically change how they do business – from trading strategy to cost structures to IT systems. What have we learned?

Read more »

The financial world is now making way for open source software, and big banks are playing follow the leader. As HSBC, Bank of New Zealand and JPMorgan all announced recently, the open source paradigm is creeping in to their technology architectures. Perhaps we’re witnessing the start of something …. ?

Let’s look at the benefits for buyside traders. Besides the ability to develop trading algorithms and execute orders, open source is lightweight and flexible enough to be deployed 10 times faster than traditional buyside trading platforms at a fraction of the cost. In today’s economic environment, financial institutions are finding that open source is ushering in the brave new world of automated trading. It offers the same robustness as proprietary models without the limitations and costly add-ons required just to make the software work the way you want it to. Plus, it offers enhanced controls for greater transparency into the platform and the code.

Next Thursday, February 19 at 2 p.m. EDT, TABB Group Senior Analyst Kevin McPartland will share his thoughts on the use of open source in automated trading. Kevin, along with our CEO, Graham Miller, will examine how exactly the open source paradigm yields speed, flexibility and competitive advantage for trading firms. Additional topics on the hot seat include:

• The case against proprietary solutions and the benefits of the open source paradigm
• Market drivers that affect OMS/EMS purchasing decisions
• How the financial community is doing more with less as IT budgets crash and burn
• How to overcome integration headaches and embrace open standards

The webinar is open to all – we just ask that you register at www.marketcetera.com/webinar.