Trade Talk Blog

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Recapping the #TTTop10: The Year
in Review

If you follow us on Twitter at @Trading_Tech, you’ve probably seen our compilation of 2012’s top 10 news stories in trading, tech and Chicago businessor as we called it on Twitter, the #TTTop10. To close out the year here on Trade Talk, we’re recapping that list.

We chose the news stories that made the biggest impact on the trading industry and on TT’s customers. Whether or not you agree with our selections, hopefully you’ll be entertained and informed by the list.

Without further ado, let’s count down our picks.

10) TT Gets Social

We joined the social media fray in a big way this year with our Twitter feed, our LinkedIn page, our TradingTechTV YouTube channel and, of course, this blog. In 2013, we’ll expand our social reach to other venues, including Google+. If you’re not already familiar with this increasingly popular platform, take a look at “Google+ Is Growing at Facebook Speed, a recent (and brief) article from Wired.

9) Chicago Tech Scene Emerges

Pundits from near and far wrote about the tech boom in TT’s toddlin’ (home)town. Among the reports were “’The Midwest Mentality’: Why Chicago’s Supposed Weakness May Be Its Greatest Strength” from The Atlantic and “Relic of an Era, Revitalized”* from the The New York Times. We’re loving this trend and very proud to be a part of it.

8) Libor Scandal

What’s a year without a scandal? We saw a big one unfold last summer, when news broke that several major U.S. and European banks had manipulated the London interbank offered rate (a/k/a the “Libor”) and other benchmark lending rates. The Financial Times created “Libor Scandal”*, an extensive web-based compilation of relevant coverage. It’s a good source for updates as the story continues to unfold.

7) No Prosecution for MF Global

Our industry was rocked to the bone in October of 2011 when MF Global imploded amidst widespread allegations of criminal wrongdoing. Although a whopping $1.6 billion in customer funds went missing and many cried for the government to bring a criminal case against ex-CEO Jon Corzine, a 10-month investigation failed to result in the filing of charges. An op-ed from The New York Times titled “Is MF Global Getting a Free Pass?” foreshadowed this outcome. Five months later, the Times made the bad news all but official in “No Criminal Case Is Likely in Loss at MF Global”. Meanwhile, The Daily News recently photographed Corzine roaming free in wealth-ridden East Hampton.

6) Eris Exchange and the Futurization of Swaps

Throughout 2012, the upstart Eris Exchange attracted an avalanche of media attention (and inked a connectivity agreement with TT) for its move to futurize interest-rate swaps by launching contracts that replicate swaps in a cheaper, more efficient manner. Waters painted a bright picture in Eris Exchange Seeks to Futurize, Standardize, Capitalize”*, and we covered the story on Trade Talk in “Swaps: They’re in Our Future”. More recently, news broke on December 20 that Morgan Stanley will make a strategic equity investment in the exchange and become an anchor bank liquidity provider. The Wall Street Journal spelled out the details in “Morgan Stanley Stake in Eris Exchange Spotlights Market Shift”*. With the deal slated to close in early 2013, and with TT’s new Eris Gateway scheduled to launch in the same time frame, we expect Eris Exchange’s star will continue to rise.

5) TT’s Platform Rebuild

TT made news in October when CTO Rick Lane announced here on Trade Talk in “The Pace of Innovation at TT” that development of a brand-new trading platform based entirely on the TTNET™-hosted ASP model was underway. Rick talked about the rebuild and other issues last month with MarketsWikiTV in this video. You’ll hear more about this next year as TT’s next-gen platform continues to evolve.

4) Regulation

Ah yes, what would our list be without this one? Not a day passed without a mainstream media mention of Dodd-Frank and regulatory reform. Waters recently provided an interesting perspective in “2012 Review: Economy, Regulation Create Perfect Data Storm”*. We even covered it ourselves on Trade Talk in “The New Role of the Software Vendor in the Midst of Risk Management and Regulatory Reform”. This issue will continue to be top of mind in 2013.

3) ADL™ Changes Trading

As we approach the peak of our list, we get to one that makes all of us at TT very proud. It’s ADL, the game-changing visual algo programming platform that we released with X_TRADER® 7.11 in March. Futures magazine tested X_TRADER 7.11 and awarded it a perfect four-out-of-four stars, citing ADL as a “potentially important programming innovation for the algorithmic trading community” and saying it “achieved its goal of providing a powerful graphical interface for the high-frequency algorithmic trader”. Read the full report in “Software Review: ADL/X_TRADER”.

2) Cliff Diving and Sandy

The runner-up in the #TTTop10 is actually two stories because we felt they were equally impactful.

At 2a is Cliff Diving, which every serious media outlet on the planet has covered ad nauseumespecially over the past few days, as we’ve been edging perilously close to the edge. Will the U.S. go over the fiscal cliff in a freefall towards economic doom and gloom or be saved by a last-minute deal? We’ll know very soon. For now, if you’ve been living under a rock and need a primer, you can read up on this debacle in “Stocks Sink 2% for the Week” from CNNMoney. Or if your eyes are starting to burn from reading the articles listed above, sit back and watch “MarketWatch Ahead: Cliff Diving”, a video from The Wall Street Journal.

At 2b is Hurricane Sandy, which ravaged the East Coast in October, killing at least 125 people and reportedly causing damages in excess of $160 billion. Sandy brought Wall Street to a grinding halt, forcing a two-day shutdown of New York’s iconic exchanges. “NYSE and Nasdaq Closed as Hurricane Sandy Hits” from CNNMoney reported the situation as it unfolded.

1) Trading Errors Abound

Atop our list of the year’s most important stories is the epidemic of trading errors and software malfunctions that plagued the industry in 2012. There were some biggies, including Knight Capital’s near-fatal mistake and the aborted BATS IPO. Rather than go through the details here, we’ll direct you to Traders Magazine, which devoted two covers to this ongoing story with “Glitch! Part 1” and “Glitch Part 2”.

That takes to the end of the list, which is fitting because we’re only hours away from the end of the year. If you’re inclined to share your top stories for 2012 or your predictions for 2013, please leave a comment here on the blog, or tweet us at @Trading_Tech and use the hashtag #TTTop10.

Thanks for joining us on Trade Talk these past few months. We look forward to connecting with you in 2013, and we wish you a happy, healthy and prosperous new year.

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Trade Globally From Anywhere At Any Time

“Hangout” Again with ADL™ on Tuesday

UPDATE: If you missed our live broadcast of the ADL Hangout, you can view the recording here.

Our first Google Hangout (below) featuring TT’s newest algorithmic trading tool, ADL, was so well received that we’re gearing up to produce another live broadcast on Tuesday, December 18th, at 3:30 p.m. CST.

If you missed our first ADL Hangout, click the “play” button above
 to watch the team build and launch an actual trading strategy with ADL

In our second episode, Product Manager John Yoo and Senior Business Analyst Tom Zagara will build the exit-side logic to the scalper algorithm introduced in the first episode. In doing so, they’ll also cover the Value Extractor Block and the concept of “virtualization”.

To watch the live broadcast, come to our YouTube channel, TradingTechTV, at 3:30 p.m. CST on Tuesday. No registration, login or special software is required. If you can’t watch us live, we’ll post the recording to TradingTechTV shortly after the event has concluded.

12/12/12 WEBINAR ALERT: Join TT
and Eris Exchange for a Demonstration
of Eris IRS Futures on X_TRADER®

UPDATE: If you missed our live webinar with Eris Exchange, you can view the recording here.As announced in September and discussed here on Trade Talk, TT will launch connectivity to Eris Exchange in early 2013.

To help our mutual customers learn more about these new trading opportunities and prepare for the rollout, TT and Eris Exchange will co-host a 30-minute webcast on December 12th at 3:30 p.m. CST/4:30 p.m. EST.


Michael Riddle, Eris Exchange (L) and Jeff Mezger, Trading Technologies (R)

The agenda will include an overview of Eris Exchange Interest Rate Swap (IRS) futures presented by Eris Exchange COO, Michael Riddle, followed by a demonstration of unique Eris-specific X_TRADER functionality by TT Senior Product Manager, Jeff Mezger .

ADL® Enhancements and
the “Dog Run” Button

The elevator panel in my apartment lobby is slightly unusual. It has up and down arrows, as one would expect, but it also has a third button labeled “Dog Run”. This button often makes visitors momentarily hesitate as they reach for the panel.

Dog Run Button:
Keep reading if you don’t know what this button does.

Every day, when I look at this elevator panel, it reminds me that even the most trivial features come with costs. The cost of one additional button may not be readily apparent. But imagine an elevator panel that includes dozens, or perhaps hundreds, of specialized buttons. A panel like this might be completely counter-intuitive and maybe even unusable.

Knowing what I know about the dog run button’s purpose, I’m sure that it’s exactly where it needs to be. However, I often wonder about the thought process that went into its design:

  • What need was this feature designed to address?
  • Was that need worth addressing?
  • If so, is this the optimal implementation?
These are the same questions we ask as we strive to innovate ADL in a way that achieves extraordinary flexibility, yet keeps it slick—both above and below the hood. As the fastest-growing product at TT, ADL has garnered more than 100 enhancement ideas from its users; the innovation that surrounds ADL is truly remarkable.

Below, I’ll shed some light on how we analyze enhancement requests, especially in the context of the three questions mentioned above. My reason for doing this is simple: I want to reassure users that their suggestions don’t disappear into a void. I also want to encourage users to continue to participate in the brainstorm and help us keep the pace of innovation on fire.

The Root Issue

When we visit a doctor, we don’t typically start by handing him or her a list of the prescription drugs we need; the doctor usually makes a diagnosis first.

In the same manner, when a product enhancement is suggested, we don’t usually jump to implementation. Instead, we examine the root issue first.

We typically find that each enhancement request is actually a request for a solution to an issue encountered by the user. An examination often reveals the root issue to be one of the following:

  • A defect that needs to be fixed
  • A need that the user doesn’t know the product already addresses
  • A need that the product doesn’t address

Here’s a real example. During the beta phase of ADL, a user suggested that we introduce the ability to automatically launch an algorithm when the market opens. Upon further interview, we discovered that the user had previously attempted to launch his algo during the pre-open, only to have it pause immediately. As a result, he resorted to manually launching his algo right at the open to gain place-in-queue, and he was looking to automate this manual action.

The root issue here was that all algos were designed to pause during untradable market states (e.g. closed, closing auction, expired, post trading, freeze etc.). What the trader really needed was a way to operate an algo outside of tradable market states. To satisfy this need, we ended up introducing the “Ignore Market State” functionality and the Market State Block.

This was a case where we decided to address the trader’s need. However, that is not always the case – every identified need begs the question: “Is the need worth addressing?”

Scope of the Product

When it comes to determining whether an identified need should fall within the scope of the product, I believe in the “less is more” philosophy. I strive to keep ADL focused on and proficient at its core competencies: market-depth-based analysis and execution.

Some users may conclude that their business needs lie outside of ADL’s scope. I recognize and respect this decision. In fact, I believe focused scope benefits the prospective user; the more focused the product, the easier it is for a user to determine whether or not a product meets his/her needs.

When ADL fits a user’s needs, its focused scope translates into a superior user experience with a product that is highly performant, intuitive and effective.

As ADL matures, we plan to gradually expand the scope to accommodate the usage of technical indicators and fundamental data. However, proficiency will always be prioritized before expansion.

Implementation: Tools, Not Options

Once we determine that a need falls within the scope of the product, we look for a solution.

The core “less is more” principle behind ADL’s implementation is self-evident in the product itself: ADL is a streamlined toolbox of blocks, not a giant collection of checkboxes and drop-down menus.

Look at the image below. I call this the “learning curve vs. flexibility” spectrum. Generally speaking, hard-coded options, such as drop-down menus and checkboxes, lie on the left; they are probably the easiest to use, but also limited in flexibility. APIs are placed on the right; they probably have steep learning curves, but are also very flexible.

Learning Curve vs. Flexibility
ADL’s implementation is deftly balanced about halfway between. It does not require the user to write code, but it does grant sufficient flexibility to excel at its core competencies.

When this principle is applied, the final implementation may end up looking nothing like the original enhancement request, even if it fully addresses the user’s need.

Back to Dog Run…

To come back to where I started, let me tell you what the dog run button does: it calls elevator car #1, which stops at the second floor, where there is an indoor area for walking dogs. Other cars don’t stop at the second floor.

Applying the principles mentioned above, it seems that this button was a downstream effect of an architectural limitation (apparently only one elevator can stop at the second floor) combined with the residents’ need to use the elevator to reach the second floor (apparently residents can’t or won’t use the stairs). Going further upstream, the root cause seems to be the residents’ need to walk their dogs indoors. I don’t own any pets, but it is my humble opinion that owners should walk their dogs outside in the first place…yes, even during Chicago winters. With that said, the indoor area seems like a superfluous feature that can be removed along with the “Dog Run” button.

While I hope I entertained you with my analysis of the dog run button, I hope even more that you gained an understanding of how your ideas and feedback fuel the processes that drive ADL’s evolution. If you’re an ADL user, I hope I’ve inspired you to contribute (or continue contributing) to the innovation of ADL.