EXANTE Algorithmic Trading: Practical Aspects

1. Algorithmic trading: practical aspects EXANTE Ltd. exante.com.mt info@exante.com.mtMoscow 2011

2. I. Algorithmic tradingII. Develop the modelIII. Launch the strategyIV. Analyze the resultsV. Trends

3. Algorithmic trading Automated trading HFT

4. Arbitrage Pricing Automated trading Buy-side Sell-sideTrendfollowing Smart order routingStat arbitrage Market Making / HFT VWAP

6. Data Hypothesis Model Testing

7. Historical Data Width Depth CorrectnessInstruments Past period Splits and divs Venues Resolution GapsCorp. actions Order book Timestamps News Counterparties Validation

9. A priori knowledgeFundamental Empirical Gut feeling

10. Visualization Datavolume Math Speed Иллюстрация с panopticon.com

11. RTS Index and S&P Index, 2010-10-11 RTSI SPX16:40 16:50 17:00 17:10 17:20 17:30 17:40

13. ModelAlpha Risks Transaction costs

14. EDGE ?

15. Model: math Prototype

16. Our experience: RDomain Libraries Open and free Slow No realtime Open and free

18. TestingData Prototype Results• Historical data • R / Python/ • Alpha• Modeling Java • Risks market impact • Cluster / cloud • Transaction and order flow • GPU costs• Realtime

20. Инфраструктура

21. Realtime data Speed Depth Coverage Low-latency L1 AmericasUltra low-latency L2 EuropeSub millisecond Raw Asia

22. Strategy Language Infrastructure ControlHigh-level (C++, Java, Client Manual C#, etc) DSL (Slang, etc) Server Automatic Visual (diagrams) Cloud GUI Strategy sandbox Data OrdersNYSE MFG Robot 1 Robot 2 Robot 3 Robot 4 LSE JP

23. Arbitrage example London Server (Telehouse) Arbitrage strategyGAZPRU On new tick: LIMIT (LSE)(MICEX) ogzd_rub = convert(ogzd, usd_rub) spread = normalize(ogzd_rub/gazpru) Filled (size) changedSpread() OGZD (LSE) On change spread: if (spread > threshold) MARKET (MICEX) place_limit(OGZD, price, size)USD/RUB Filled (price)(FOREX) On limit fill: If (limit_is_filled) place_market(GAZPRU, size) Parameters: threshold

24. VWAP example Moscow Server (MacomNet) VWAP strategySBER bid/ask On new tick:(MICEX) vwap = recalculateVwap(trades) execute_vol = recalculate(average_volume, volume) MARKET (MICEX)SBER volume executeOrder(execute_vol)(MICEX) Filled (size) on market fill:SBER trades(MICEX) our_vwap = update(price, size) vwap_delta = our_vwap - vwap Parameters: average_volume

26. Gather results dataMarket snapshot Orders Data Latency Strategy parameters

27. Export the results data Excel R, Matlab ExportVisualization Model

28. Compare with the model

29. Optimize the parameters Model Results Testing Trading

31. Adoption100 FORTS CME GLOBEX Vol, % Msgs, % 90 E-mini S&P 500 Futures 51.66 69.9390 EuroFX Futures 69.32 83.4180 Eurodollar Futures 51.29 64.4670 60 Crude Oil Futures 35.34 71.2460 Algorithmic Trading and Market Dynamics July 15, 20105040 Foreign Exchange Buy-side, % Sell-side, %30 Order Routing 25 9220 Time-slice 25 1510 Liquidity 42 46 0 Alpha 92 39 Vol, % Msg, % FX Hedging 25 39 Estimated by FORTS 09.2011 Streambase 2011 Special Report on FX

32. Dodd-Frank Swap Execution Facility.SEC 15c3-5 Eliminate naked access to exchange.MiFID II Crossing networks, derivatives, HFT.

33. Algotrader: a new breed MathematicsTechnology Finance

34. Strategies Multi-assetULL DMA HFT trading Buy-side or sell- FX, Eqty, Debt, 5μs / km side? Derivs Market making Europe, USA, Asia< 100μs / algo Liquidity search Feeds and and aggregation execution106 msg / sec Fast and reliable Stat arb data

35. TechnologiesSoftware Overclocking FPGAMulti-core GPGPU Cloud x32 x200 x30000

36. Our experience: cloud Power Diversity Cost controlEngineering Compliance Latency

37. Service!

38. Anatoliy Knyazev ak@exante.com.mtVladimir Maslyakov vm@exante.com.mt