Trade Talk Blog

The official blog of Trading Technologies, your source for professional futures trading software.

Image via Renjith Krishnan/ 

As someone who has been at TT for more than just a couple of years, I have seen various CTOs and product managers come and go. One common trend was always this: in the world of limited engineering resources and competing priorities, risk management features would typically take a back seat to the high-performance demands of the end user who was routing orders on TT’s platform. Historically, I guess that made some sense. At the end of the day, screen sales drove the business, and screen sales weren’t driven by the demands of the risk administrator.

TT Must Change with the Times

Only recently has the product management responsibility for risk and administration at TT become my own. So, now it’s my job to give the risk administrator a voice. Call it fate or bad luck (depending on the day), but this responsibility happened to coincide with some major risk management blow-ups resulting in quite a bit of regulatory reform. This, in turn, has resulted in rising compliance concerns and a major overhaul of how FCMs view risk management. So, the role I’m performing now looks very different than it would have five years ago at TT.

The conversation between TT and its customers has gone from common questions like these:

  • Does your system do pre-trade risk checking per user?
  • Can fat-finger limits be configured?
  • Can I configure a daily loss limit?

To these:

  • I’m concerned about high-frequency trading algorithms; how do I prevent a trader from flooding the market with orders?
  • I have my own sophisticated system for evaluating risk exposure; how do I use that system to programmatically shut off trading at the user, account or account group level on your platform?
  • We have a customer that hosts their own TT trading environment on their own servers; how can we ensure that we have exclusive risk management control over that trading environment?


So, What Has Changed?

There are some very real risk and compliance concerns that did not exist before—or if they existed, they have since been amplified. Proper risk management practices are more critical than ever.

What Else is Different?

For starters, TT has taken notice. What was once an afterthought has now become a major driver for us. We understand the importance of having multiple types and levels of risk control on our platform. Implementing these on our existing and next-generation platforms is something that sits atop our priority list. Risk management has found its voice and its place at TT.

Risk and Regulatory Challenges Faced by Large FCMs

As I meet with some of the larger FCMs who currently provide TT’s software to clients, I hear many of the same stories. Mainly, that TT is just one of many vendors that they offer. Managing risk across all platforms is a challenge, and they’ll gladly take any opportunity they can to consolidate the number of systems they have.

For us, the message is clear. We must make our software more flexible and easy to integrate with the FCMs’ existing risk management systems. They are looking for API functionality to get data in and out of TT’s platform. Pre-trade risk checking on TT isn’t valuable if it isn’t encompassing trades that are happening on other systems or on the floor. Because TT is just one of several systems, real risk management is happening outside of TT’s platform, often in the FCMs’ proprietary systems.

So, What is the Role of the Vendor?

Our response to this is to build flexible API functionality that provides a means for integrating TT’s software into other systems and processes. We’re doing that with products like TT API, and a brand new TT User Setup Risk API. And, when necessary, we must evolve our risk management features. We just launched, among other things, order throughput limits on our gateways, and we’re in the process of introducing new account and account group-based risk checking features into a platform that has historically been trader-based. Meanwhile, we will continue to develop new and compelling products, such as ADL™, to provide end users with advanced trading solutions.

Challenging times? Yes. But, for me, it creates an exciting opportunity to work closely with our clients to meet their changing needs. We either become flexible and adapt, or we must be replaced. If we can’t help to minimize their risks, then our trading features won’t matter. As of late, I’ve been inspired by the ability of our engineers to build platform-wide solutions into our current trading architecture. Look for more on this in future blog posts.

UPDATE: If you missed our live broadcast of the ADL Hangout, you can view the recording on our YouTube channel, TradingTechTV.

We recently started moving our corporate IT infrastructure to Google’s enterprise solution. It’s a big change, but I’m really excited about this from a marketing perspective because Google offers some pretty amazing collaboration tools. One of these is Google Hangouts on Air.

This Thursday, November 8th, at 3:30 p.m. CT, we will stream our first Hangout. Our broadcast won’t be formal or scripted, with fancy graphics or an elaborate set. In fact, it won’t even be tied to TT’s official corporate YouTube channel, which will launch soon. But we see incredible potential for Hangouts as a way to talk about our products and engage our users, so we’re going to dive in and experiment.
Our debut broadcast will feature Product Manager John Yoo and Senior Business Analyst Tom Zagara. They will present TT’s newest algorithmic trading tool, ADL. While you watch, they will also build and launch an actual trading strategy—live—using ADL.

To access our Hangout, just come to John’s YouTube channel at 3:30 p.m. CT on Thursday. Our broadcast will automatically play. No registration, login or special software is required. Note Chrome and Internet Explorer are supported, but Firefox may not be compatible. If you can’t make it for the live broadcast, you’ll be able to access a recording on John’s YouTube channel after the event concludes.

Hope you can “hangout” with us.

It is a great honor for Trading Technologies’ X_TRADER to be named “Best Buy-Side Commodities Trading Platform” in this year’s Buy-Side Technology Awards. The award, which recognizes “the leading technologies and vendors in their area of expertise, through an auditable and transparent methodology underpinned by the input and experience of six judges,” was announced at the sixth annual Buy-Side Technology Awards in London on Friday.

The 2012 award is a significant accolade for TT in a period of increased agitation and uncertainty for our industry. That our platform was chosen from a large field of worthy competitors is deeply satisfying to all of us at TT.

At the core of our philosophy is the simple idea that everything we do, from providing exchange connectivity and hosting services to designing world-class algorithmic design tools, centers on the end user. Although our system addresses the needs of many constituents, including regulators, exchange operators and broker trading and operations staff, it is ultimately the buy-side end user who dictates whether we have succeeded. And with buy-side users facing new regulatory and market hurdles, they need an execution platform that provides superior performance and dependability as well as compliance with existing and emerging regulatory requirements.

Why Go Out on a Limb?

Because, according to Will Rogers, that’s where the fruit is. The futures industry exists because of risk, and unlike “capital markets,” where securities are issued and sold to generate business capital, futures are primarily about risk mitigation. But while you can hedge oil consumption or metals prices, certain forms of risk are harder to identify and mitigate.

Take, for example, the risks inherent in rapidly evolving regulatory requirements. With new regulation spanning a variety of derivatives and trading operations, today’s buy-side user faces a growing wave of change that makes forecasting near-term events, let alone the distant future, increasingly difficult. With the Republican presidential candidate vowing to repeal Dodd-Frank, there is certainly a lot that remains up in the air.

Regulatory change is moving at such a rapid pace that some observers speak of “regulatory arbitrage” as a potential response to ambiguous or overreaching legislation. Derivatives trading has never been simple, but the onslaught of new challenges overlaid on market participants adds even more complexity to the business.

Then there are the debacles. Things that were simply given in the past, for example, thinking of established brokers and customer funds as the trading equivalent of bedrock, have gone out the window, and the buy-side must now hedge previously unthinkable scenarios. Who could have predicted established brokers such as MF Global and Peregrine would disappear virtually overnight?

In light of the post-crisis climate, the need for trading system stability and flexibility has never been greater. More than ever, buy-side traders are demanding reliable, flexible and compliant trading capabilities to keep up with an ever-changing landscape.

In awarding the 2012 Buy-Side Technology award to TT, the judges had much to commend their decision. For buy-side firms needing to run their derivatives book while safeguarding both their assets and their reputation, our clients tell us the TT platform is second to none. TT’s comprehensive risk controls provide system-wide exposure and P&L limits to ensure that all orders are validated and managed against pre-trade limits in real time without exception, and without compromise to our microsecond-level performance. The Synthetic Strategy Engine allows buy-side traders to create broker- and exchange-neutral synthetic orders for finely tailored execution management, and our new ADL™ allows them to build proprietary alpha-seeking and execution algos that are also broker neutral. The TT FIX Adapter provides a robust means of integrating third-party order-management and middle-office systems with TT, and allows buy-side portfolio managers to stage orders directly from their OMS to TT’s X_TRADER for immediate execution or care order handling.

We Live in Interesting Times

Old curses of questionable attribution aside, we do in fact live in a much-changing world. Markets, products and rules now evolve at a dizzying pace. TT recognizes that buy-side traders are facing more challenges, and to this end we continue to develop flexible and trustworthy capabilities for buy-side traders worldwide. We are grateful to have been selected to receive this year’s award from Buy-Side Technology, and remain ever-committed to providing superior capabilities to our buy-side end users.

TT is hosting several functions on Wednesday and Thursday of this week in conjunction with FIA Expo. These events are open to all registrants. Read on for more details.

Scenes from FIA Expo 2011

ADL™ Presentations & Consultations

Visit our ADL Demo Suite to attend a scheduled demonstration of TT’s newest algorithmic trading tool, ADL, or consult informally with an ADL expert. Find us in the Hilton’s Joliet Room on the third floor. No reservations are needed.

Wednesday’s ADL Presentations
11am Order Ticket & Order Management Algos
2pm OCOs & Sniper Algos

Thursday’s ADL Presentations
11am Scalping Algos
2pm Broker Productivity with ADL

ADL Consultations
Wednesday & Thursday
10:00 a.m. – 3:00 p.m

In-Booth Presentation with Eris Exchange

We’re co-hosting a presentation in our booth (#820) with Eris Exchange on Wednesday at 3:30 p.m. Eris’ CEO, Neal Brady, will provide an overview of the exchange and its products. Then, Jeff Mezger, senior product manager with TT, will demonstrate how to trade Eris products on X_TRADER®. Learn about TT’s new Eris Gateway, which will be available early next year.

Taste of Expo

We’ll be serving cold beer and hot sliders during Taste of Expo at 4:00 p.m. on Wednesday. Enjoy a beverage and a bite, and mingle with our team during this very popular event.

MultiBroker Preview

Throughout Expo, visit our booth to preview TT’s forthcoming MultiBroker functionality, which we’ll launch next year through our TTNET™ hosting service. MultiBroker will provide the buy side with one-click access to multiple FCMs from a single X_TRADER workstation or API, while delivering the same breadth of markets and superior speed, stability and accuracy of TT’s single-broker platform.

Still Need an Expo Pass?

If you aren’t yet registered for Expo, you can still get a free exhibit hall pass, compliments of TT. Simply print this invitation and register on site with the promo code 2708.

Hope to see you at Expo!

The operational costs of managing and maintaining a professional trading platform and the capital investment required to stand up the necessary infrastructure to support such a platform are substantial. This is particularly true for our TTNET™ hosting service, which provides the expansive functionality and robust performance of TT software along with global reach that spans the world’s major financial markets.

The TTNET global distribution network

The value proposition for customers of TTNET is the transfer of a significant portion of the aforementioned costs and risks to TT, while at the same time procuring higher quality services with lower overall costs than they could do on their own. It’s a similar value proposition of most service providers across all industries.

Our clients who utilize TTNET tell us they prefer our hosting services because it combines the advantages of our world-class, professional trading software platform with the advantages of a highly available, purpose-built infrastructure. An infrastructure deliberately tailored to meet the needs of professional traders, with attributes that include bare-metal computing performance, dedicated and performant connectivity options, and hosting proximity to, or even co-location with, major trading venues and other financial markets partners.

Providing these benefits, though, comes at a cost premium over more general-purpose IT hosting venues. And while we believe these benefits are in the best interest of our end users and worth a premium over lower-cost alternatives, we don’t believe our current implementation, execution and standard service offerings are as efficient or relevant as they could be, irrespective of the constraints of our current software platform. In short, there is room for improvement in both cost and quality.

The prominence of cloud computing in mainstream IT is accelerating the maturation of many IT technologies, and it is leading to better tools for automation and service deployment. But it’s also helping to dispel many industry misconceptions about the security, reliability and performance around three fundamental technologies of “the cloud”: multi-tenancy, virtualization and Internet connectivity—three fundamental technologies that are also fundamental cloud tenets because they directly impact scalability (and consequently cost).

Like all technologies, cloud technologies have their own challenges and limitations. But when applied intelligently and to the right problems, they are viable and cost-effective tools, even for our industry (see: NASDAQ and NYSE Technologies).

Those familiar with TTNET know that we’ve been leveraging many tenets of the cloud for a while now. In retrospect, TTNET is effectively a private cloud and has been since its inception. And while we plan to leverage cloud paradigms, cloud technologies, and even private and public services extensively in our next-generation platform, we’re not waiting for it to arrive before we take advantage of changing perceptions and extend our use of fundamental cloud tenets.

For example…

Historically, TT has only offered dedicated broker environments—meaning an end user in TTNET could only trade through one broker if he had a single X_TRADER® screen. But soon, TT will begin offering MultiBroker service to TTNET clients through a multi-tenant version of TT’s futures execution platform.

Designed as a single execution environment for traders supported by multiple brokers, MultiBroker is TT’s first foray into offering a true application-level, multi-tenant service. Multi-tenancy is a concept that can be applied to any layer of the IT service stack, from the physical layer of shared data center facilities (e.g., power, space and cooling) all the way up to the application layer serving user transactions. Typically, the further up the stack a service provider goes, the greater economies of scale that can be achieved. With MultiBroker, we are going way up the stack.

In addition to the commercial benefits MultiBroker will bring to our client base, its multi-tenant design will greatly enhance the scalability and efficiency of this service offering for both our customers and end users. And now, with the majority of our platform supporting multi-core technology, even greater scale can be achieved while maintaining competitive execution latency and efficient throughput scalability.

Our customers and end users who continue to utilize our original single-tenant hosting option in TTNET will not be left behind, as we are looking at improvements there as well. Today, TTNET uses virtualization technology and tools to support a number of management systems, but only for a very small percentage of trading-related applications, and only where functionality is out of the trade execution data path. Going forward, we plan to leverage virtualization technologies to support mainline trading applications in failover and disaster recovery situations where availability is paramount, but where some compromise in performance is acceptable. But even in the case of failover, by retaining the host’s proximity to the trading venue, we anticipate better performance than we offer today.

Finally, as our customers become more comfortable utilizing secure Internet connectivity, we are looking to transition more leased connections to the Internet. For example, we are evaluating the use of Internet as a backup connectivity option to dedicated private-line circuits without restrictions. This would result in lower connectivity costs to TTNET for our broker firms and end users. Additionally, while TT continues to expand and mature its Strategy Engine (SE) server-based execution solutions, including Autospreader SE, Synthetic SE and Algo SE, we expect more users to connect to TTNET directly via the Internet. As a consequence, we anticipate growing demand for lower-cost back-office connectivity options that offer “Internet-like” connectivity, but over a private cloud.

Look for more insights and perspectives on TTNET in my next blog. Thanks for reading.