Chicago Trading Tech in Focus
Led by moderator Sujit Gupta, former chief investment officer of hedge fund Maverick Capital, panelists at the Chicago Tech Trends That Matter For Low-Latency Firms Conference weighed in on what trading technology clients can expect from big data, cloud computing, microwave connectivity, and exchange integration.
Based on the book Architects of Electronic Trading, written by Stephanie Hammer, representatives from Anova Technologies, Eurex, Equinix and xCelor were introduced by the author, then offered insights including advice for a start-up fund.
“The last ten microseconds of latency matters to some clients,” said Bernard Hosman of Eurex’s Deutsche Borse. “Evaluate whether your edge depends on it.”
“Optimize the most important layer of the execution stack and determine which you need for your strategy to be successful,” said Mike Persico of Anova Technologies.
“Firms are now un-bundling,” noted John Knuff of Equinix. “Turnkey puts you at a competitive disadvantage.”
On the subject of better, faster, cheaper technologies, Knuff advised users to demand price performance delta. “If you can’t reach it, go find it; sometimes, creative destruction in your own organization is needed,” he said.
Said Robert Walker, chief technology Officer for xCelor, “if you are not co-located in the right place, or have a lousy network, hunker down” and fix it. Small upstarts find ways to make some big players’ technology available to everyone else, he noted.
“Trading Smart” was a recurring theme in discussing the current competitive environment. Equinix’s Knuff cautioned about the increasingly voracious appetite for information and dependency on speed. “Speed does not make a bad trade better,” he said. “To get an edge, you must trade smart quickly. We’re seeing a lot of investment from our customers in pre-trade risk checking.”
Turning to the trend of big data in the industry, Gupta said he regards big data as “looking for a needle in a stack of needles.”
Walker noted big data is getting bigger from fragmentation, including the proliferation of ETFs and inter-related products. “When volatility comes back, data will become overwhelmingly big. Filter and normalize this stuff down to a manageable size so your software can keep up,” he said.
Persico said it is important to excel at small data as well as big data, and low-frequency networks have given a competitive edge to many in the industry. Exchange-to-exchange connectivity is not a passing trend, though there may be some coalescing back to or ahead from copper to fiber to wireless latencies to achieve advantages, he added.
On cloud computing, a common belief is that the cloud is a panacea to save money, or push a large part of technology out to an external vendor. While most in the trading industry use the cloud to offload public data sets only, exchanges could move simulation environments to the cloud for back-testing, as security risk is not a threat for that, panelists noted.