Slides for speech of EXANTE Managing Partners Vladimir Maslyakov and Anatoliy Knyaze , entitled "Practical aspects of algorithmic trading and high-frequency trading", on TradeTech Russia 2011 Presentation highlights the problems associated with the development of a model (pre-trade analysis), the launch of the strategy (trading) and the post-trade analysis, as well as an overview of the algorithmic trading in general, and a small glimpse into the future.

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

2. I. Algorithmic trading
II. Develop the model
III. Launch the strategy
IV. Analyze the results
V. Trends

3. Algorithmic trading
Automated trading
HFT

4. Arbitrage Pricing
Automated trading
Buy-side Sell-side
Trend
following
Smart order
routing
Stat arbitrage
Market Making / HFT VWAP

6. I. Algorithmic trading
II. Develop the model
III. Launch the strategy
IV. Analyze the results
V. Trends

7. Data Hypothesis Model Testing

8. Historical Data
Width Depth Correctness
Instruments Past period Splits and divs
Venues Resolution Gaps
Corp. actions Order book Timestamps
News Counterparties Validation

9. Data Hypothesis Model Testing

10. A priori knowledge
Fundamental Empirical
Gut feeling

11. Visualization
Data
volume Math
Speed
Иллюстрация с panopticon.com

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

13. Data Hypothesis Model Testing

14. Model
Alpha Risks Transaction
costs

15. EDGE ?

16. Model: math
Prototype

17. Our experience: R
Domain Libraries Open and free
Slow No realtime Open and free

18. Data Hypothesis Model Testing

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

20. I. Algorithmic trading
II. Develop the model
III. Launch the strategy
IV. Analyze the results
V. Trends

21. Инфраструктура

22. Realtime data
Speed Depth Coverage
Low-latency L1 Americas
Ultra low-latency L2 Europe
Sub millisecond Raw Asia

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

24. Arbitrage example
London Server (Telehouse)
Arbitrage strategy
GAZPRU 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

25. VWAP example
Moscow Server (MacomNet)
VWAP strategy
SBER 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. I. Algorithmic trading
II. Develop the model
III. Launch the strategy
IV. Analyze the results
V. Trends

27. Gather results data
Market snapshot Orders
Data
Latency Strategy parameters

28. Export the results data
Excel R, Matlab
Export
Visualization Model

29. Compare with the model

30. Optimize the parameters
Model
Results Testing
Trading

31. I. Algorithmic trading
II. Develop the model
III. Launch the strategy
IV. Analyze the results
V. Trends

32. Adoption
100 FORTS CME GLOBEX Vol, % Msgs, %
90 E-mini S&P 500 Futures 51.66 69.93
90
EuroFX Futures 69.32 83.41
80
Eurodollar Futures 51.29 64.46
70
60 Crude Oil Futures 35.34 71.24
60 Algorithmic Trading and Market Dynamics July 15, 2010
50
40
Foreign Exchange Buy-side, % Sell-side, %
30
Order Routing 25 92
20
Time-slice 25 15
10 Liquidity 42 46
0 Alpha 92 39
Vol, % Msg, % FX Hedging 25 39
Estimated by FORTS 09.2011 Streambase 2011 Special Report on FX

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

34. Algotrader: a new breed
Mathematics
Technology Finance

35. Strategies
Multi-asset
ULL 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 execution
106 msg / sec Fast and reliable
Stat arb
data

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

37. Our experience: cloud
Power Diversity Cost control
Engineering Compliance Latency

38. Service!

39. Anatoliy Knyazev
ak@exante.com.mt
Vladimir Maslyakov
vm@exante.com.mt