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Exante algotrading

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Sergey's Troshin presentation on algorithmic trading at SSE Riga, 23.01.2015

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  • What are the mean latencies between sending an order and receiving an execution report on Euronetx, LSE, Xetra, Madrid, Milain, Liffe, Eurex, Meff, Idem?
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  • Do you provide colocation services in exchange datacenter or in your datacenter?
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  • Could you explain how Exante can offer DMA access to exchanges without being member of any exchange? Or is it an access to your prime broker gateway? In that case are you sure you sure your prime broker is providing dma access or does he internalise the order flow?
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Exante algotrading

  1. 1. Algorithmic Trading and Trading Platform Sergey Troshin, Ph.D. EXANTE. Director st@exante.eu www.exante.eu SSE, Riga, Jan 2015
  2. 2. Contents • EXANTE history and Unique Selling Points (5 min) • Trading. Manual. Automatic - well known approaches (30 min) • Broker inside out - technical aspects (30 min) • Questions and Answers (15+ min) • Working in EXANTE
  3. 3. EXANTE History
  4. 4. Global Hedge Capital Fund by EXANTE founders 2007 November
  5. 5. Frustration with brokers increases slow! limited products! primitive! not flexible! 2007 2010
  6. 6. Brokerage platform starts named EX ANTE2010 January
  7. 7. EXANTE founded and issued European license 2011 March
  8. 8. 6 Offices
  9. 9. Coverage Fi Fixed Income Ft Futures Op Options Fn Funds Bf Bitcoin Fund St Stocks & ETFs FxFX & Metals
  10. 10. EXANTE Platform inin ATP out Customized backoffice reporting API (FIX) Platform
  11. 11. 300 + Servers
  12. 12. Trading. Manual and Algorithms.
  13. 13. Steps to Execution 1. Choose Markets and Symbols 2. Market Analysis and Decision Making 3. Execution 4. PnL and Account Control 5. Go back to step 1 and 2
  14. 14. Manual Trading
  15. 15. Instrument Search
  16. 16. Market Analysis
  17. 17. Execution
  18. 18. Account Summary and PnL
  19. 19. Algorithmic Trading
  20. 20. Algorithmic trading Automatic trading HFT – high frequency trading Algorithmic Trading
  21. 21. How does Execution Works? Order driven market model – Market Order – Limit Order
  22. 22. Automatic trading Buy-side Sell-side Statistical arbitrage VWAPMarket Making / HFT Trend following Arbitrage Smart order routing Well Known Strategies.
  23. 23. Automatic trading Market Making and Scalping
  24. 24. Trend Following Technical Analysis • SMA / EMA • Moving Average Convergence/Divergence • Bollinger bands • Stochastic oscillator • Parabolic SAR • Rate of Change (ROC) • Relative Strength Index (RSI) • etc • …
  25. 25. Mean Reversion
  26. 26. Volume Weighted Average Price
  27. 27. Volatility and Option Trading Implied volatility prediction 1. Delta neutral portfolio – Buy option / sell stock on volatility going up – Sell Option / buy stock on volatility going down 2. Various options strategies – Straddle – Strangle – Butterfly – Etc.
  28. 28. Arbitrage Strategy Example 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) Parameters: threshold Another example: S&P stocks on NYSE and NASDAQ in NY against Futures on CME in Chicago
  29. 29. Pairs Trading and Statistical Arbitrage Market neutral portfolio – Short one set of stocks – Long another set – Rebalance very often • Pair Trading – Coca-Cola (KO) and Pepsi (PEP) – Renault (RNO) and PSA Peugeot Citroen (UG) • Statistical Arbitrage – Up to 1000+ stocks in portfolio – Huge quantitive calculations
  30. 30. How to Compare Strategies?
  31. 31. Which is better? Strategy Sharp Ratio Calculations HFT / Delay Sensitive? Trend Following Mean revision Bad Easy No Volatility Trading Bad Hard No Arbitrage / Pair trading Good Easy Yes Statistical Arbitrage Good Hard Yes Market Making Good Easy Yes
  32. 32. Data Guess Model Approval Building Your Own Algorithm
  33. 33. Historical Data Completeness Symbols Exchanges News Depth Past Precision Order Book Quality Splits etc. Gaps Timestamps
  34. 34. Data Rendering Huge Volume Processing Speed Technical analysis Иллюстрация с panopticon.com
  35. 35. Guess and Knowledge Intuition EmpiricalFundamental
  36. 36. 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
  37. 37. 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
  38. 38. Data Guess Model Approval Algorithm Creation Cycle
  39. 39. Technical Background
  40. 40. 300 + Servers
  41. 41. ->What is located on servers?
  42. 42. -> Where are other exchanges?
  43. 43. -> Where FIX server is located? -> What is algorithm?
  44. 44. FIX Server Location One exchange – Low latency algorithm • Exchange data center – No special requirements • Back up data center or any random data center Several exchanges – Arbitrage with low latency algorithm • Exchange data center (exchange depends on algorithm) • Dedicate link to other exchanges – No special requirements • Any data center (non exchange preferably) • Common Internet link
  45. 45. Creating an Algorithm • Any programming language • 3rd party software • Run algorithm on your server or in broker’s VM • Control through the trading terminal
  46. 46. Trading Terminal • Market Analysis • Manual trading • FIX orders control • Account control -> What about other servers?
  47. 47. Trading Data and Client Accounts Processing + DEMO environment + Development servers
  48. 48. Have a Strategy? Ready For Production?
  49. 49. Prime broker … Retail broker Choosing a Broker Volumes Delays Commissions
  50. 50. General 1. Exchanges/Markets coverage 2. Trading volumes 3. Regulation issues 4. Legal issues 5. Commissions and fees
  51. 51. 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
  52. 52. NEXT GENERATION PRIME BROKER Questions? Portomaso Business Tower, Level 7, ST. Julians, Malta info@exante.eu | st@exante.eu | www.exante.eu

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