Electronic Trading in 2015: Faster or Smarter

Electronic Trading in 2015:
Faster or Smarter?
Annalisa Sarasini
@AnnalisaSaras
asarasini@smart-trade.net
Faster or Smarter?
• Kilian Jornet
© 2014 smartTrade Inc.
• Ueli Steck
Faster or Smarter?
© 2014 smartTrade Inc.
However…
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Electronic trading - the big race
© 2014 smartTrade Inc.
Evolution of electronic trading
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Or rather…
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Until 2008…
 The new speed bumps….
© 2014 smartTrade Inc.
The new drivers
 Regulatory obligations
 Funds are getting used for regulations rather than
reducing latency
 Narrowing Margins
 Defensive investment
 Risk Management
 Business Agility
 Through reuse of commodity technology allowing
business to focus on USP
 Technology as a commodity
 Business Functionality as a Service
 Connectivity, Aggregation etc.
© 2014 smartTrade Inc.
What keeps them awake?
Manage risk
Time to market
Auditing & compliance
Increase revenue
Reduce cost
HOW DO I MAKE
MONEY?
© 2014 smartTrade Inc.
Open framework
Monitoring
IT Resources
Capacity planning
HOW DO I KEEP
MY JOB?
Capital Markets trading scene setting
Create Book
Distribute Prices
Order Execution
Credit/Risk Management
Post-Trade
© 2014 smartTrade Inc.
Or sometimes….
Aggregated
Trading
Screen & API
Pre-Pricing
Checks
Rate Controls
Screen & API
Static Data
Repository
Streaming
Algo / eRisk Orders
Post Trade & Risk
Hedging
Rules &
Smart Order
Routing
Position
Book
Internal Bank
© 2014 smartTrade Inc.
Order
Acceptance
Engine
Order
Books
RFQ
Multi
Bank
Portals
SDP
GUI
Pre-Trade Credit &
Intervention Checks
Credit
APIs
Liquidity
Liquidity
Providers
Dealer
Intervention
Screen
Internal
Crossing
OBO
GUI
RFS
APIs
Aggregation
Client
Pricing
Engine
Distribution
Bank
Pricing
Engine
APIs
API
Today’s challenges
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The big dilemma
© 2014 smartTrade Inc.
Simplify: Multi-Asset
Aggregation
Bank Pricing
Engine
Client Pricing
Engine
Dealer
Intervention
Screen
Order Acceptance
Engine
Internal
Crossing
Position
Book
Credit
Position
Book
Pre-Pricing
Checks
Aggregation
Bank Pricing
Engine
Client Pricing
Engine
Hedging Rules &
Smart Order
Routing
Algo /
eRisk
Orders
Order
Books
Position
Position
Book
Book
Dealer
Intervention
Screen
Order Acceptance
Engine
Pre-Trade Credit & Intervention
Checks
Aggregated
Trading Screen &
API
Rate Controls
Screen & API
Pre-Pricing Checks
Aggregation
Bank Pricing
Engine
Client Pricing
Engine
Internal
Crossing
Dealer Intervention
Screen
Order Acceptance
Engine
Pre-Trade Credit & Intervention
Checks
Cre
dit
Order
Books
Position
Position
Book
Book
Strea
R
ming R
F
F
S
Q
Credit
Internal
Crossing
Hedging Rules &
Smart Order
Routing
Strea
R
ming R
F
F
S
Q
Pre-Trade Credit & Intervention
Checks
Rate Controls
Screen & API
Algo / eRisk
Orders
L
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q
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y
A
P
I
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Order
Books
Aggregated
Trading Screen &
API
Post
Trade &
Risk
L
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A
P
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Algo / eRisk Orders
Post Trade & Risk
Hedging Rules &
Smart Order
Routing
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B
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A
P
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© 2014 smartTrade Inc.
Liquidity
Providers
Pre-Pricing
Checks
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n
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l
B
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k
A
P
I
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Fixed Income
Liquidity
Providers
Rate Controls
Screen & API
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l
B
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k
A
P
I
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FX
Aggregated
Trading Screen &
API
Post Trade
& Risk
Equities
Liquidity
Providers
L
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P
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Strea
ming R
R
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Static Data
Repository
OBO GUI
Multi
Bank
Portals
SDP GUI
API
Static Data
Repository
OBO GUI
Multi
Bank
Portals
SDP GUI
API
Static Data
Repository
OBO GUI
Multi Bank
Portals
SDP GUI
API
Simplify: Multi-Asset
One Platform – Multi-Asset
© 2014 smartTrade Inc.
Flexibility
“80/20” rule – 80% commodity, 20% customisable
Aggregation
Create
Book
Execution algos
Order
Execution
Pricing models
Distribute
Prices
Hedging strategies
Credit/Risk
Mgmt
• Open APIs
• Method of injecting business logic
• Quick to market
© 2014 smartTrade Inc.
Frameworks and patterns
Everybody is now using multi-core, linux servers with GBs memory .....
-
The Disruptor Framework
Non-blocking Message Queues pattern
- How to achieve Transaction Integrity
- A pool of threads will consume each session under the
constraint: only one thread in a session at a time.
S1 S2
Pending
sessions
© 2014 smartTrade Inc.
SN
Thread pool
Connectivity to the markets
• Adoption of FIX (Financial Interchange eXchange Protocol)
- Equities, FX and Now Fixed Income
• ASCII Tag/Value
• 8=FIX.4.1 9=112 35=0 49=BRKR 56=INVMGR 34=235
52=19980604-07:58:28 112=19980604-07:58:28 10=157
• “The nice thing about standards…” - many variations!!
• FIX engine – understands session protocol & application messages
• QuickFIX, QuickFIX/J, FIX8, etc
© 2014 smartTrade Inc.
Messaging for distribution
• The low latency race:
 Brokerless architecture
 Multicast
• Messaging appliances
 TCP Fanout
• New Initiatives:
 Aeron: open source high performance messaging
• Smart low-latency and high throughput balance
• Decouples messaging middleware dependencies from internal
architecture
• Multiple transmission media support (UDP, InfiniBand, Shared
Memory, etc.)
• Easy monitoring of buffering on a per stream basis
• https://github.com/real-logic/Aeron
© 2014 smartTrade Inc.
Monitoring in trading environments
Predict the unpredictable:
• Major events can make you bankrupt
• Not just a latency play
• High performance in terms of both latency and throughput is critical to
success
• Monitor risk/exposure
• Use of standards
• And Open Source
Performance/latency monitoring:
• Averages don’t make sense for latency
• Standard deviations make even less sense
• Need to measure all data and look at percentiles
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And reporting
Transparency – no more black boxes
© 2014 smartTrade Inc.
Databases





Back and Front Office
Big Data
Data Analytics and Compliance
Tick Database
Back testing
 NoSQL databases
- MongoDB, Couchbase, Cassandra,etc
Data
Queries
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User Interface - HTML5
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Software as a Service
 At the beginning mainly Colocation for Equities
 Tier 2, Regional Banks, Buy Sides
 Cloud based end-to-end trading solutions
 Multiple variants
 Public Cloud
 Private Cloud
 Completely dedicated environment
Private cloud proves to be more cost effective/most benefits
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Cloud hosting options for Capital Markets
Exchange proximity
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Public Cloud
x
Private Cloud
Dedicated Cloud
3rd Party
Private Clo


?
Knowledgeable support
x


x
Performance
x


?
HA in trading
x



?
Outsource IT


Capital Markets expertise
x



?
Security
x


?
Full trade lifecycle control
x


x
Regulatory compliance
x


x
Incident Response time
x


x
Market Exchange testing
x


x
Cost
$
$ $ $
$ $ $ $
$ $
The global picture
© 2014 smartTrade Inc.
Faster or Smarter?
© 2014 smartTrade Inc.
© 2014 smartTrade Inc.
Thank You!
Annalisa Sarasini
@AnnalisaSaras
asarasini@smart-trade.net