Algorithmic Trading in different geographies -
Description: Algorithmic Trading in different geographies - technologies - regulations - competition - markets Rajib Ranjan Borah Market Microstructure, Liquidity and Automated Trading Workshop. Fitch Learning, London. 16-17 June 2014. 4th Annual
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slide1. Algorithmic Trading in different geographies - technologies - regulations - competition - markets Rajib Ranjan Borah Market Microstructure, Liquidity and Automated Trading Workshop.
Fitch Learning, London. 16-17 June 2014.
4th Annual Conference on ‘Behavioral Models and Sentiment Analysis Applied to Finance’, London, 16-20 June 2014.<br>
slide2. Agenda Most relevant factors in analyzing different geographies
Current AlgoTrading landscape in various geographies
The road ahead ?
Q&A<br>
slide3. Agenda Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Most relevant factors in analyzing different geographies
Current AlgoTrading landscape in various geographies
The road ahead ?
Q&A<br>
slide4. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?<br>
slide5. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?<br>
slide6. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?<br>
slide7. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?<br>
slide8. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?<br>
slide9. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?<br>
slide10. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?<br>
slide11. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?<br>
slide12. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?<br>
slide13. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets<br>
slide14. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets<br>
slide15. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets Regulations<br>
slide16. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets Regulations Market Size<br>
slide17. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets Regulations Market Size Competition<br>
slide18. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets Regulations Market Size Competition Technology<br>
slide19. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets Regulations Market Size Competition Technology<br>
slide20. Agenda Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Most relevant factors in analyzing different geographies
Current AlgoTrading landscape in various geographies
The road ahead ?
Q&A<br>
slide21. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide22. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Equity volumes – avg monthly volumes (USD million)<br>
slide23. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Index FO – annual volumes (USD million)<br>
slide24. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Equity FO – annual volumes (USD million)<br>
slide25. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Currency – annual volumes (USD million)<br>
slide26. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Interest Rate – annual volumes (USD million)<br>
slide27. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA ETF – annual volumes (USD million)<br>
slide28. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Commodity– annual volumes (USD million)<br>
slide29. Automated Trading System components Application Order Manager Market Data Complex Event Processing engine Exchange 1 Storage Application Server Exchange Strategy Settings UI State Mgmt (PnL + Position) Order / Execution Monitor Within application RMS Maths Calc RMS Admin Monitor Exchange 2 FIX FIX Data Normalizer Order Router Back office record MktData Store Event History Adaptor for third party apps – R, Matlab, etc Data Retrieval Data Vendor Replay of stored data Simulator exchange Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide30. Automated Trading System components Application Order Manager Market Data Complex Event Processing engine Exchange 1 Storage Application Server Exchange Strategy Settings UI State Mgmt (PnL + Position) Order / Execution Monitor Within application RMS Maths Calc RMS Admin Monitor Exchange 2 FIX FIX Data Normalizer Order Router Back office record MktData Store Event History Adaptor for third party apps – R, Matlab, etc Data Retrieval Data Vendor Replay of stored data Simulator exchange Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA To connect to any exchange, you need to build
(i) market data adaptor for that exchange’s protocol<br>
slide31. Automated Trading System components Application Order Manager Market Data Complex Event Processing engine Exchange 1 Storage Application Server Exchange Strategy Settings UI State Mgmt (PnL + Position) Order / Execution Monitor Within application RMS Maths Calc RMS Admin Monitor Exchange 2 FIX FIX Data Normalizer Order Router Back office record MktData Store Event History Adaptor for third party apps – R, Matlab, etc Data Retrieval Data Vendor Replay of stored data Simulator exchange Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA To connect to any exchange, you need to build
(ii) OMS adaptor to convey transaction information as per exchange protocol<br>
slide32. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally One of the most popular protocol is FIX
Financial Information eXchange protocol
Data transferred as sequence of tag=value pairs e.g.: 8=FIX.4.2 | 9=77 | 35=0 | 49=MCXSXTRADE | 56=xxxxx | 34=24 | 43=N | 52=20140607-05:14:05 | 112=DNLDCOMPLETE | 10=127 1 Account
2 AdvId
3 AdvRefID
4 AdvSide
5 AdvTransType
6 AvgPx
7 BeginSeqNo
8 BeginString
9 BodyLength
10 CheckSum
11 ClOrdID
12 Commission
13 CommType
14 CumQty
15 Currency
16 EndSeqNo
17 ExecID
18 ExecInst
19 ExecRefID 20 ExecTransType
21 HandlInst
22 IDSource
23 IOIid
24 IOIOthSvc (no longer used)
25 IOIQltyInd
26 IOIRefID
27 IOIShares
28 IOITransType
29 LastCapacity
30 LastMkt
31 LastPx
32 LastShares
33 LinesOfText
34 MsgSeqNum
35 MsgType
36 NewSeqNo
37 OrderID
38 OrderQty 39 OrdStatus
40 OrdType
41 OrigClOrdID
42 OrigTime
43 PossDupFlag
44 Price
45 RefSeqNum
46 RelatdSym
47 Rule80A(aka OrderCapacity)
48 SecurityID
49 SenderCompID
50 SenderSubID
51 SendingDate (no longer used)
52 SendingTime
53 Shares
54 Side
55 Symbol
56 TargetCompID
57 TargetSubID<br>
slide33. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally<br>
slide34. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally<br>
slide35. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally<br>
slide36. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally<br>
slide37. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally<br>
slide38. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Regulations<br>
slide39. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Regulations<br>
slide40. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide41. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide42. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide43. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide44. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide45. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide46. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide47. Agenda Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Most relevant factors in analyzing different geographies
Current AlgoTrading landscape in various geographies
The road ahead ?
Q&A<br>
slide48. Shift in market volumes Likely threat of introduction of a HFT tax (financial transaction tax), Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide49. Shift in market volumes Likely threat of introduction of a HFT tax (financial transaction tax),
+
Over crowding of US and European automated trading markets Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide50. Shift in market volumes Likely threat of introduction of a HFT tax (financial transaction tax),
+
Over crowding of US and European automated trading markets
Likely shift of volumes towards Asian, LatAm
(increasing number of global firms setting up shop in India, Singapore, Hong Kong, Brazil, etc) Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA ↓<br>
slide51. Growth of market segments Regulations in certain markets are going to introduce new destinations for algorithmic traders:
Swaps traded electronically in SEFs instead of OTC
Post Dodd-Frank Wall Street Reform and Consumer Protection Act, four categories of interest rate swaps and two categories of credit default swaps are going to be listed on SEFs (Swap Execution Facilities) Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide52. Technology Simplification/Consolidation Different exchanges shifting to standardized technology protocols instead of maintaining proprietary protocols
(Bombay Stock Exchange in India adopting Eurex Platform.
Budapest, Bursa Malaysia adopting CME Globex
Multiple developing economy exchanges like Bursa Istanbul adopting FIX protocol) Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide53. Technology Arms race no more ? In a lot of aspects, we are reaching the limits of technology Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide54. Technology Arms race no more ? In a lot of aspects, we are reaching the limits of technology
+
The cost of technology is also coming down Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide55. Technology Arms race no more ? In a lot of aspects, we are reaching the limits of technology
+
The cost of technology is also coming down
↓
Therefore technology might no longer be the sole asset of privileged market participants Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide56. Technology Arms race no more ? In a lot of aspects, we are reaching the limits of technology
+
The cost of technology is also coming down
↓
Therefore technology might no longer be the sole asset of privileged market participants
↓
Trading Alpha will again shift towards statistical excellence rather than technological upper-hand Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide57. Agenda Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Most relevant factors in analyzing different geographies
Current AlgoTrading landscape in various geographies
The road ahead ?
Q&A<br>
slide58. Copyright © 2014 by QuantInsti Quantitative Learning Private Limited.
Although great care has been taken to ensure accuracy of the information in this presentation – however the author (and QuantInsti) accepts no liability or warranty for the precision, correctness or completeness of any statement, estimate or opinion. QuantInsti also accepts no liability for the consequences of any actions taken on the basis of the information provided.
The slides of this presentation cannot be taken separately from the whole set of slides.
Prior approval from QuantInsti is necessary before usage of this presentation for educational and (or) commercial purposes.
This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion. Disclaimer<br>
slide59. Thank You! To Learn Automated Trading Connect With Us: SINGAPORE
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#10-10, The Arcade,
Singapore - 049317
Phone: +65-6221-3654 INDIA
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Mumbai - 400 072
Phone: +91-022-61691400<br>
Fitch Learning, London. 16-17 June 2014.
4th Annual Conference on ‘Behavioral Models and Sentiment Analysis Applied to Finance’, London, 16-20 June 2014.<br>
slide2. Agenda Most relevant factors in analyzing different geographies
Current AlgoTrading landscape in various geographies
The road ahead ?
Q&A<br>
slide3. Agenda Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Most relevant factors in analyzing different geographies
Current AlgoTrading landscape in various geographies
The road ahead ?
Q&A<br>
slide4. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?<br>
slide5. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?<br>
slide6. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?<br>
slide7. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?<br>
slide8. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?<br>
slide9. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?<br>
slide10. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?<br>
slide11. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?<br>
slide12. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?<br>
slide13. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets<br>
slide14. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets<br>
slide15. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets Regulations<br>
slide16. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets Regulations Market Size<br>
slide17. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets Regulations Market Size Competition<br>
slide18. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets Regulations Market Size Competition Technology<br>
slide19. How do you decide: where to trade? Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA As a trading manager, how do you decide which geographies to trade ?
Am I allowed to trade in that country (i.e. how conducive are regulations) ?
Are foreigners allowed to trade ?
Are there restrictions on position-sizing / short-selling ?
Are these markets interesting to trade ?
What are the listed instruments ?
What is the volume traded ?
Will I be able to make profits ?
What is the level of sophistication of competition ?
Who are the leading players ?
What are the complexities to connecting to these markets ?
Technological protocols used by these exchanges – common standard protocols OR unique custom protocols
Brokers to connect to these markets Regulations Market Size Competition Technology<br>
slide20. Agenda Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Most relevant factors in analyzing different geographies
Current AlgoTrading landscape in various geographies
The road ahead ?
Q&A<br>
slide21. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide22. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Equity volumes – avg monthly volumes (USD million)<br>
slide23. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Index FO – annual volumes (USD million)<br>
slide24. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Equity FO – annual volumes (USD million)<br>
slide25. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Currency – annual volumes (USD million)<br>
slide26. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Interest Rate – annual volumes (USD million)<br>
slide27. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA ETF – annual volumes (USD million)<br>
slide28. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Commodity– annual volumes (USD million)<br>
slide29. Automated Trading System components Application Order Manager Market Data Complex Event Processing engine Exchange 1 Storage Application Server Exchange Strategy Settings UI State Mgmt (PnL + Position) Order / Execution Monitor Within application RMS Maths Calc RMS Admin Monitor Exchange 2 FIX FIX Data Normalizer Order Router Back office record MktData Store Event History Adaptor for third party apps – R, Matlab, etc Data Retrieval Data Vendor Replay of stored data Simulator exchange Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide30. Automated Trading System components Application Order Manager Market Data Complex Event Processing engine Exchange 1 Storage Application Server Exchange Strategy Settings UI State Mgmt (PnL + Position) Order / Execution Monitor Within application RMS Maths Calc RMS Admin Monitor Exchange 2 FIX FIX Data Normalizer Order Router Back office record MktData Store Event History Adaptor for third party apps – R, Matlab, etc Data Retrieval Data Vendor Replay of stored data Simulator exchange Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA To connect to any exchange, you need to build
(i) market data adaptor for that exchange’s protocol<br>
slide31. Automated Trading System components Application Order Manager Market Data Complex Event Processing engine Exchange 1 Storage Application Server Exchange Strategy Settings UI State Mgmt (PnL + Position) Order / Execution Monitor Within application RMS Maths Calc RMS Admin Monitor Exchange 2 FIX FIX Data Normalizer Order Router Back office record MktData Store Event History Adaptor for third party apps – R, Matlab, etc Data Retrieval Data Vendor Replay of stored data Simulator exchange Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA To connect to any exchange, you need to build
(ii) OMS adaptor to convey transaction information as per exchange protocol<br>
slide32. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally One of the most popular protocol is FIX
Financial Information eXchange protocol
Data transferred as sequence of tag=value pairs e.g.: 8=FIX.4.2 | 9=77 | 35=0 | 49=MCXSXTRADE | 56=xxxxx | 34=24 | 43=N | 52=20140607-05:14:05 | 112=DNLDCOMPLETE | 10=127 1 Account
2 AdvId
3 AdvRefID
4 AdvSide
5 AdvTransType
6 AvgPx
7 BeginSeqNo
8 BeginString
9 BodyLength
10 CheckSum
11 ClOrdID
12 Commission
13 CommType
14 CumQty
15 Currency
16 EndSeqNo
17 ExecID
18 ExecInst
19 ExecRefID 20 ExecTransType
21 HandlInst
22 IDSource
23 IOIid
24 IOIOthSvc (no longer used)
25 IOIQltyInd
26 IOIRefID
27 IOIShares
28 IOITransType
29 LastCapacity
30 LastMkt
31 LastPx
32 LastShares
33 LinesOfText
34 MsgSeqNum
35 MsgType
36 NewSeqNo
37 OrderID
38 OrderQty 39 OrdStatus
40 OrdType
41 OrigClOrdID
42 OrigTime
43 PossDupFlag
44 Price
45 RefSeqNum
46 RelatdSym
47 Rule80A(aka OrderCapacity)
48 SecurityID
49 SenderCompID
50 SenderSubID
51 SendingDate (no longer used)
52 SendingTime
53 Shares
54 Side
55 Symbol
56 TargetCompID
57 TargetSubID<br>
slide33. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally<br>
slide34. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally<br>
slide35. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally<br>
slide36. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally<br>
slide37. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Technology Protocols globally<br>
slide38. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Regulations<br>
slide39. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Regulations<br>
slide40. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide41. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide42. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide43. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide44. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide45. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide46. Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Algo trading in various landscapes<br>
slide47. Agenda Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Most relevant factors in analyzing different geographies
Current AlgoTrading landscape in various geographies
The road ahead ?
Q&A<br>
slide48. Shift in market volumes Likely threat of introduction of a HFT tax (financial transaction tax), Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide49. Shift in market volumes Likely threat of introduction of a HFT tax (financial transaction tax),
+
Over crowding of US and European automated trading markets Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide50. Shift in market volumes Likely threat of introduction of a HFT tax (financial transaction tax),
+
Over crowding of US and European automated trading markets
Likely shift of volumes towards Asian, LatAm
(increasing number of global firms setting up shop in India, Singapore, Hong Kong, Brazil, etc) Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA ↓<br>
slide51. Growth of market segments Regulations in certain markets are going to introduce new destinations for algorithmic traders:
Swaps traded electronically in SEFs instead of OTC
Post Dodd-Frank Wall Street Reform and Consumer Protection Act, four categories of interest rate swaps and two categories of credit default swaps are going to be listed on SEFs (Swap Execution Facilities) Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide52. Technology Simplification/Consolidation Different exchanges shifting to standardized technology protocols instead of maintaining proprietary protocols
(Bombay Stock Exchange in India adopting Eurex Platform.
Budapest, Bursa Malaysia adopting CME Globex
Multiple developing economy exchanges like Bursa Istanbul adopting FIX protocol) Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide53. Technology Arms race no more ? In a lot of aspects, we are reaching the limits of technology Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide54. Technology Arms race no more ? In a lot of aspects, we are reaching the limits of technology
+
The cost of technology is also coming down Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide55. Technology Arms race no more ? In a lot of aspects, we are reaching the limits of technology
+
The cost of technology is also coming down
↓
Therefore technology might no longer be the sole asset of privileged market participants Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide56. Technology Arms race no more ? In a lot of aspects, we are reaching the limits of technology
+
The cost of technology is also coming down
↓
Therefore technology might no longer be the sole asset of privileged market participants
↓
Trading Alpha will again shift towards statistical excellence rather than technological upper-hand Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA<br>
slide57. Agenda Relevant factors for analyzing different markets → Current landscape in different geographies → The future → QA Most relevant factors in analyzing different geographies
Current AlgoTrading landscape in various geographies
The road ahead ?
Q&A<br>
slide58. Copyright © 2014 by QuantInsti Quantitative Learning Private Limited.
Although great care has been taken to ensure accuracy of the information in this presentation – however the author (and QuantInsti) accepts no liability or warranty for the precision, correctness or completeness of any statement, estimate or opinion. QuantInsti also accepts no liability for the consequences of any actions taken on the basis of the information provided.
The slides of this presentation cannot be taken separately from the whole set of slides.
Prior approval from QuantInsti is necessary before usage of this presentation for educational and (or) commercial purposes.
This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion. Disclaimer<br>
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