Lecture of Sergey Troshin, Ph.D., Director at EXANTE, covers the main aspects of practical aspects of algorithmic trading. Main points of presentation include process of modeling the strategy, implementation and evaluation of results. The recording is available at the following link: https://www.youtube.com/watch?v=8JToXHeqElA. Enjoy and share the video!

1. Practical Aspects of
Algorithmic Trading.
Bitcoin hedge fund.
Gatis Eglitis, Managing Partner
Sergey Troshin, Ph.D., Head of IT Strategy and Operations
Part 2: Algo trading

2. 2
Algorithmic trading
 Modeling the strategy
 Implementing the model
 Result analysis
 Production
Choosing a broker
 Prices
 Technologies
 Stability
What is next?
Contents

3. Algorithmic trading
Automatic trading
HFT – high
frequency trading
Strategy implementation

4. Automatic trading
Buy-side Sell-side
Statistical
arbitrage VWAPMarket Making / HFT
Trend
following
Arbitrage
Smart order
routing
Algo trading strategies

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

6. Volume Weighted Average Price

7. Data Guess Model Approval
Algorithm creation cycle

8. Historical Data
Completeness
Symbols
Exchanges
News
Depth
Past
Precision
Order Book
Quality
Splits etc.
Gaps
Timestamps

9. Data Rendering
Huge
Volume
Processing
Speed
Technical
analysis
Иллюстрация с panopticon.com

10. Guess and Knowledge
Intuition
EmpiricalFundamental

11. Trading Model
Alfa Algorithm Risks Expenses

12. Approval. Pre-trade Analysis
Input
•Historical data
•Market influence
modeling
•Configuration
parameters
Backtesting
• Prototype (R / Python
/ Java / C++ / Mathlab
/ Erlang / …)
• GPU
• Cluster / Cloud / …
Result
•Possible income
•Risks
•Real Expenses

13. Backtest Results
Param 1 Param 2 … Income Expenses
X1 Y1 … 10% 4%
X1 Y2 … 15% 11%
… … … … …
Xn Yn … 5% 2%
Execution with:
osame input data
odifferent set of parameters values

14. Computational Technologies
Software Overclocking FPGA
Multi-core GPGPU Cloud
x32 x200 x30000

15. Data Guess Model Approval
Algorithm creation cycle

16. Ready to Production?

17. 17
Choosing a broker

18. Prime
broker
…
Retail
broker
Broker
Volumes Delays Commissions

19. Broker Connection
Broker
Client Computer
Trading
terminal
Algorithm
Control
Trading
Internal
Protocol

20. Broker Connection
Broker
Client ComputerWidely used protocols:
FIX, Plaza2, Technology
providers, Custom
TraderAlgorithm

21. Broker Connection
Broker Client Computer
RDP, SSH
Trader
Algorithm

22. General
Exchanges/Markets coverage
Trading volumes
Regulation issues
Legal issues
Commissions and fees

23. Technology
Market data
Delays
Market Depth
Best Bid Offer
Trades
Execution
Delays
Client side /
Server side
Pre-trade
risks, Software
Connection
Protocol
Virtual
Machines
Co-location
Control
Trades Export
Interface
Error handling

24. Servers and locations

25. 25
What is next?

26. Post trade analysis
Excel Program
Charts Model
Export Trade
Results

27. Compare with model

28. Algorithmic Trader
Technology
Math
Finance

29. Questions?
Sergey Troshin, Director
+356 2015 0000, st@exante.eu
29

30. NEXT GENERATION
PRIME BROKER