Derivatives Market Access Needed
With U.S. and European regulators attempting to push derivatives from the ‘dark’ of private negotiations to the ‘light’ of exchanges, derivatives traders need to make sure they have the right connections and connection speeds for trading and data feeds.
Intensifying regulatory regimes are driving increases in collateral requirements, credit controls, and risk scrutiny, compelling derivatives trading firms to rethink what skill sets and tools provide a competitive advantage.
One competency that provides less of a competitive advantage for market participants than it did a few years ago is pure trading speed.
“Differentiation in the markets based on speed and owning their technologies is not providing enough benefit, as latency reductions have been largely realized,” said Steve Woodyatt, chief executive of Object Trading, which provides direct market access (DMA) infrastructure for electronic exchange connectivity engineered for high-performance trading.
Object’s FrontRunner suite offers low latency, high-volume order management, coupled with integrated real-time price distribution and pre-trade risk management. According to the company, position risk and exposure can be viewed through a single gateway — ‘one-layer’ access – and the platform offers a quick time to market and low technical overhead.
Outsourcing to independent infrastructure for order execution, market data, and comprehensive risk management — in a single application programming interface (API) — reduces the complexity of exchange connectivity, said Woodyatt, a former hedge-fund manager. Outsourcing also allows firms to better focus on their edge in trading.
“Margin efficiency, once a secondary consideration, has become an integral part of trading as market participants try to find the perfect balance that maximizes capital available to be deployed toward trading strategies and minimizes margin consumption,” said Woodyatt.
“We’ve turned the vendor model inside out, by opening interfaces on all applications and opening the API to allow all to connect all the way through to get the required information,” Woodyatt stated. FrontRunner replaces stacks of applications, and buy-side and sell-side clients can pick what best suits their style using modular views, he added.
The FrontRunner DMA suite connects more than 55 equity, derivatives and FX markets globally. More than half of the global Tier 1 banks use FrontRunner, which supports more than USD$100 billion in daily notional trading value, according to the company. That volume doubled in fiscal 2013 from the year prior, Woodyatt said.