The Next Chapter for Hedge Funds

Two data points surfaced in recent days that underline why we’re so passionate about democratizing trading with open source software.

First, hedge fund returns are up. And not just up from the carnage of last year, but with 2.5% returns in September, it’s looking like hedge funds could have their best year since 2003.  According to the Eurekahedge Fund Index — and bolstered by a number of other hedge fund research firms — the industry grew by $26.3 billion last month, bringing total assets managed to $1.42 trillion.

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High-Frequency Trading Doesn’t Need Speed Limits, It Needs A Better Image

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..

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Screencast Series on YouTube

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.

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Marketcetera Partners with NYSE Technologies to Deliver Next Generation SaaS Offering

Just as high frequency is the future of trading and open source is the future of trading technology, we believe that the cloud will be the future of the trading ecosystem. In today’s world of exploding market data and intense pressure on the financial services industry, buy-side firms and traders will be less able to afford costly on-premise proprietary trading systems that require long implementation periods and lag behind the rapidly changing needs of users. An open source architecture provides the benefits of customization, flexibility, and agility that we’ve been discussing since the inception of Marketcetera. But let’s take it one step further…

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Marketcetera is on YouTube!

Toli Kuznets, our CTO and co-founder led our first experiment with a screencast demonstration of the Strategy Studio. In this first video, Toli takes us through the process of developing and deploying new trading strategies in Ruby. The video is available below and on our YouTube channel.

One of our goals at Marketcetera is to make the platform intuitive and easy to use. To that end, this screencast is meant to enable current and new users to learn the ins and outs of the Strategy Studio more quickly. As always, we appreciate your feedback on the product as well as our first screencast.

The Rise (and Rise) of Automated Trading

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?

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Announcing….. Marketcetera V1.5

Since the release of the Marketcetera Automated Trading Platform 1.0 in January, we’ve brought on several great new board members and got the ball rolling with exciting new customers. And recently, we’ve heard continuing calls for open source from financial services firms trying to navigate a new market with smaller budgets. When Graham and Toli started Marketcetera a couple years ago, they found a hole in the automated trading market and decided to fill it. But while open source was one part of the answer, they believed that high-performance and functionality needs to compliment the unprecedented customizability and accessibility that open source offers traders.

To that end, we’re announcing today the general availability of the Marketcetera Automated Trading Platform 1.5 (www.marketcetera.com). The purpose of this update is to provide even more scalability so that multiple users can collaborate using remote servers to turn trading strategies into immediate executions. The update also allows for monitoring of profit and loss in real time so that traders can adjust to new data as it becomes available throughout the day. Key features of 1.5 include:

  • Real-time intraday position and profit and loss monitoring.
  • Simplicity and security for multi-user installations
  • Level 2 and depth-of-book market data
  • Strategy Studio, allowing multiple agents to build and execute strategies across multiple servers

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Seven Months After The Crash

Dow Jones Index Drop

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?

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A Veteran’s Perspective

This week’s blog post comes from W. Brennan Carley, our newest Board member…

I am very excited to have recently joined the board of Marketcetera. Several colleagues have asked why I joined the board, so here is what I found so compelling about Marketcetera:

First, the team at Marketcetera has come up with a platform that will revolutionize trading. Early in my career I left IBM to join Instinet when I saw how it was changing the way the world trades by introducing the first ECN… Automating the process of matching orders. Radianz was a revolution in connectivity, providing a standard (outsourced) platform to connect to liquidity centers around the world. What I see in Marketcetera is similarly game-changing.

Specifically, Marketcetera is doing two fundamental things that are significant:

• Marketcetera has built a Trading PLATFORM. Until now, strategy driven traders had two choices: They could either build an entire system from scratch, which means that they would have to recreate a lot of the “plumbing” that was not value-add. Or they could buy a system from a vendor, spend a lot of time and money customizing and implementing that system, risk vendor lock-in, and share their proprietary trading strategies with the vendor. Of course they would have to do it all again when they needed to update their strategy.

With the Marketcetera platform, all of the necessary infrastructure is built into the platform: real-time low latency market data processing, automated parsing of market data and FIX messages, complex event processing to support correlation of factors that lead to a trading decision, automated generation of FIX messages, order routing to deliver orders and receive execution notices, and a toolkit to build strategies in various scripting languages (java, python, ruby). The trader can leverage this foundation and quickly build and deploy his strategy.

• By embracing open source, Marketcetera has made it much easier for traders to modify the platform to optimize it for their needs. This can range from small changes that make a particular strategy easier to implement, to larger changes like addition of asset classes or other sources of data. The general media focuses on the cost saving benefits of open source, and the advantages of a community that contributes (the “bazaar” model versus the “cathedral”.) While these certainly apply, a much more subtle but profound benefit from the open source model is that it allows traders to be agile in response to changing markets, to protect their own intellectual property, and to retain a competitive advantage in their alpha generation. Paradoxically, by building an open source platform, Marketcetera has enabled its users to protect their intellectual property better than any closed system would! Continue reading

Moving Forward Together in an Open Source World

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.