High Frequency Trading driving the need to build quickly, run fast


In just about any race there is usually a starting point and a finish line, unless of course you are in an arms race.  For that sort of race there may have been some nebulous beginning in the
distant past, but there is no finish line. The race just keeps sprinting
along, each competitor angling for an edge, regularly recharging their ammunition supply with some new weaponry to get
ahead however slight or temporary.

I recently read an interesting article describing High Frequency Trading
as embroiled
in an arms race. I certainly believe it's well entrenched in such a
conflict, but frankly this combat has arguably had a beneficial net
effect especially in that it's contributed to the wellspring of
invention, inspiring the creative spirit in all the supporting
attributes that make High Frequency Trading a reality. Behind any
trader (and trading firm) is an entire armada including the
vendors supplying the underlying hardware,
networks, software platforms and trading applications.  They
are all immersed in the war.  As new hardware, software
and/or algo's are deployed it allows the trader to do battle and
speed ahead even if it's just for a short while.  Competitive
pressures, increasing market volatility, regulatory imperatives, risk
mitigation and a host of other challenges are the land mines and
roadside bombs on the long and winding road that stall and
slow causing re-tooling and re-stocking the ammunition (i.e.
algo strategies). There is no time to stop and catch your breath
or stand on the roadside.

Sang Lee
from the Aite Group reports that High Frequency Trading has had a
significant impact on the overall market, providing greater liquidity,
tighter spreads and overall improving the quality of the market.
 At the macro level these are great advancements and mark a
natural evolutionary step due to so many market changes in recent years
(i.e. electronic trading venues, adoption of CEP platforms for algo
trading, etc.) in Equities and beyond (i.e. FX and Futures &
Options).  Down in the trenches, the battles rage on day by
day as a multitude of traders and an untold number of algo
strategies provide the market liquidity by moving in and out
of positions in milliseconds (or even less time). The trading
firms engaged in this never ending conflict drive a set of imperatives
on software infrastructures for building and deploying algos in the
High Frequency battlefield:

Rapid development and customization of algo's

Algo strategies in the High Frequency
world have a limited life time. They soon become obsolete (i.e.
whatever alpha they took advantage of has disappeared due to the
competition, economic changes, or other situations).  To react and
respond to this inevitability, having the right sort of tooling to
recalibrate strategies is a necessity. This includes graphical modeling
tools for Quants to prototype ideas quickly, backtest with historic
data, test in a scalable manner to instill confidence prior to
production rollout and lastly dynamic parameterization of strategies
from graphical dashboards. Not forgetting the code-slinging
types, an Integrated Development Environment (IDE) for support of event
processing language (EPL) development for more low-level tasks.

Abstracting over increasingly complex strategy logic

Supporting Quants with a rich and
robust set of functionality from the basics (connectivity to
markets) to the advanced (Linear Algebra, Black Scholes, and other
statistical functions).

Support for the 'ilities (availability, security, reliability, …) to manage the mundane

Deploy with confidence. An important role of software infrastructure is
to instill confidence that deployed strategies are always available,
securely accessed and run without failure.

Support for scalable performance, providing high throughput and low latency

This is probably the most paramount
requirement in the arms race of High Frequency Trading.  The race
to the microsecond is pushing both hardware and software vendors alike.
Parallelism in CEP engines like Apama's Correlator can leverage
multi-core processor architectures like the Intel Nehalem

Along with my colleague Dan Hubscher,  I have recorded a 30 minute webinar that describes how the Apama platform along with the Apama Algorithmic Trading Accelerator meet these imperatives.

The pre-recorded webinar, is available here:  Apama Algorithmic Trading Accelerator, Build Quickly, Run Fast.

Once again thanks for reading (plus watching and listening to the webinar in this case), you can also follow me at twitter, here.
Louie

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