Technological and regulatory changes are requiring a shift in the way trading firms develop and deploy algorithms.

“The focus, for the majority, is no longer on how fast a firm can trade, rather it pertains to how quickly firms can move from idea to execution,” said Jamie Oschefski, head of accounts and strategic partnerships at trading technology provider Embium. “The opportunity resides in the ability to get new or updated strategies to market in the shortest amount of time, whether it be through an intuitive development environment or the use of drag-and-drop strategy building tools.”

Embium’s clients are looking for broker-neutral solutions that allow them to rapidly construct, test and globally deploy complex strategies across all asset classes, on the path of least resistance.

Embium’s “Execution Blueprint” and “Algorithm Development Kit” (ADK) provide firms with a hybrid platform, incorporating the ease of a high-level drag-and-drop environment for visual construction with an extensive lower level development kit specific for algorithm design.

“Given that traders and computer scientists usually speak a different language, Embium’s hybrid toolset has created a culture where traders and developers can effectively work together,” Oschefski said.

The last few years have seen a cascading effect in the way capital markets have evolved since RegNMS and MiFID were implemented in the US and Europe respectively, Celent research analyst David Easthope said in a report.

“The evolution has been led by technological innovation in various stages which led to the proliferation of algorithmic trading and subsequently high frequency trading,” said Easthope. “In principle, increased dark pool activity has been facilitated by the pervasiveness of algorithmic trading, along with efficient and reliable systems for matching trades automatically.”

The latency arms race is rapidly becoming a theme of the past. The fastest microwave networks between Aurora IL and Carteret NJ are currently clocked at about 4.14ms (one-way), where the theoretical minimum is 3.95ms based on the speed of light.

“Given only 0.19ms of improvement, this variable is fast approaching the physical limitations of the universe set by quantum mechanics and relativity,” said Oschefski. “With the significant barriers to entry and exorbitant overhead associated with maintaining and advancing the requisite infrastructure and technology, only a few trading firms can play in this space while preserving a competitive edge.”

So where is the new edge?

Conventional methods of developing quantitative or systematic trading strategies use standard programming languages such a C++, JAVA and C#, or proprietary scripting languages commonly used by vendors as a tactic to “lock-in” their users. However, the advancement in drag-and-drop strategy design has opened the door for firms to seek out hybrid development environments.

“When you eliminate the need for coding, you substantially decrease the time required for debugging and testing for correctness, while virtually removing the opportunity for coding errors,” said Oschefski. “That being said, there will always be the need for a development environment, particularly for firms with highly skilled programmers.”