Best New Product: Xero Volatility Trading Engine

Volatility Hedges Offer Haven from Corrections

Exegy won Best New Product (Xero Volatility Trading Engine) at the 2022 Markets Choice Awards.

Traders Magazine caught up with David Taylor, Co-President and Chief Technology Officer of Exegy, to learn more.

David Taylor

What is your reaction to winning the Award at the 2022 Markets Choice Awards?

Exegy is thrilled that Markets Media honored Xero VTE with its award for Best New Product. We believe Xero is truly a game-changing technology and are gratified that the MCA panel recognized its potential as well.

How did your product come about and what gap in the marketplace does it aim to fill?

Exegy has long been focused on the promise of hardware acceleration. Our flagship product, the Exegy Ticker Plant, leveraged field-programmable gate arrays (FPGA) to dramatically improve the speed and capacity of market data delivery to our clients. We wanted to bring that same hardware acceleration to the trading side, especially targeting derivatives market making, where the speed, volume, and complexity of trading have driven out all but the most heavily invested HFTs. We believe that Xero VTE’s ultra-low latency trading, off-the-shelf flexibility, and cost efficiency can effectively open up that market to a larger variety of firms.

Please describe Xero Volatility Trading Engine — what are the primary capabilities and how is it unique?

What makes Xero VTE unique is hardware acceleration, based on FPGA technology. It provides tick-to-trade latency performance of 120 nanoseconds for canceling and under 250 nanoseconds for quoting and aggressing orders. But Xero VTE also provides tremendous capacity—each appliance supports up to 64,000 contracts activated at any given time.

What are your long-term objectives and ambitions for Xero Volatility Trading Engine?

Currently, Xero VTE is certified for the Chicago Mercantile Exchange (CME), and our next goal is support for US equity options markets. In addition, Exegy’s 2021 merger with Vela Trading Systems has opened new opportunities, thanks to the synergy between Xero VTE and the Metro Trading Platform. By augmenting Metro’s high-performance software platform with Xero’s nanosecond speeds, we believe the result will be an even more powerful tool for derivatives market making.

What are market participants’ primary needs in the area of volatility trading, and how is this evolving?

Volatility trading is one of the most complex areas in modern markets, since every price change to a single stock requires the ability to process changes to tens of thousands of derivative bids and offers. This in turn requires a vast amount of computing capacity, and until recently necessitated substantial investment and development time to achieve. For the last several years, HFTs have dominated the space, simply because they could afford the financial investment in the technology. It’s why Exegy has created Xero VTE – a commercially available product that would allow smaller or newer firms to leapfrog into this arena. We believe that this technology will make the derivatives markets more efficient, just as previous technological innovations have done for the capital markets as a whole.

What are recent accomplishments for Exegy?

Our most important recent accomplishments have been Exegy’s merger with Vela Trading Systems, and more recently, the acquisition of Enyx. The merger with Vela allowed us to round out our product portfolio to cover solutions for the entire trading lifecycle – market data, predictive analytics, algos and automation, and execution. The acquisition of Enyx, a leading provider of FPGA-based, high-performance trading solutions, allows us to partner with capital markets firms who have the most demanding latency requirements. These ventures were made possible by the backing of Marlin Equity Partners. Marlin believes in Exegy’s business plan of innovative disruption and democratization of capital markets technology and is enthusiastic about a merged Exegy that is greater than the sum of its parts.

What are your current initiatives at Exegy?

We have just launched our combined product portfolio, which provides comprehensive solutions across the capital markets ecosystem—market data, predictive signals and analytics, trading platforms, and execution. We’ve unveiled our new consolidated market data feed, Axiom, which combines the best features of the legacy Exegy and Vela feeds. And our Signum product continues to evolve. We started with a suite of predictive and detection signals, and then applied artificial intelligence to those products and the data they generate to create exciting new offerings, including a suite of alpha strategies and an “intelligent” VWAP enhanced with the power of prediction.

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