Open-Source Software Aims to Bridge Data Silos09.13.2012
An industry effort to corral the stampede of market data feeds using software innovations is starting to bear fruit, enabling traders to employ advanced predictive analytics into their strategies.
OpenMAMA, an open-source project by the not-for-profit Linux Foundation dedicated to fostering the growth of the Linux operating system, aims to address the industry-wide problem of increasing complexity arising from proprietary software, vendor-specific data models and non-standard application programming interfaces (APIs).
MAMA (Middleware Agnostic Messaging API) was developed by NYSE Technologies, the technology arm of transatlantic exchange operator NYSE Euronext, and was “open-sourced” to Linux Foundation and renamed OpenMAMA in late 2011.
The objective of OpenMAMA is to provide an industry-standard, open, vendor-neutral messaging and market data platform.
FlexTrade, among other vendors, is supporting OpenMAMA, as a means of providing exchange market data clients with direct access to FlexEdge, its predictive analytics platform offering advanced forecasting capabilities for trading U.S. equities.
FlexEdge supplies intraday volume forecasts for use by sell-side and buy-side institutions. These volume forecasts represent a substantial improvement over traditional volume estimation techniques and can help clients manage slippage costs, improve order sizing and reduce volume-weighted average price tracking error.
Predictive analytics is a relatively new forecasting tool for the electronic trading space.
“The demand driving predictive analytics in trading is the same demand that is driving trading in general,” said Max Palmer, director of algorithmic solutions at FlexTrade.
In particular, trading is becoming increasingly algorithmic and increasingly computer-driven. “In this scenario, accurate information is paramount,” Palmer said. “Machines are consuming market data and making decisions based upon it. Being able to accurately predict future volume provides key advantages to algorithms and to traders executing their orders manually.”
Through collaboration with NYSE Technologies, clients of NYSE Technologies will receive access to intra-day volume forecasts for 3,000 equities and exchange-traded funds, thus giving them a possible edge in managing their trading executions.
“Customers will also have accurate and up-to-date predictions of the volume yet to trade within the remainder of the day,” said W. Todd Watkins, Global Markets Data at NYSE Technologies.
This information can be of critical importance to a trader who receives a block order 10 minutes before the close in a stock that he or she has not traded before.
“FlexEdge gives an immediate and accurate prediction of the volume that will trade in that stock in the final 10 minutes, allowing the trader to time his or her executions to take advantage of end-of-day price movements,” Watkins said.
OpenMAMA provides a vendor-neutral “integration layer” for a variety of messaging middleware systems. Messaging middleware is software that acts as the glue connecting disparate applications. Users of OpenMAMA can develop event-driven applications against a single standard API, use one or more of the supported middleware products and switch them at will.
A related standard, OpenMAMDA (Middleware Agnostic Market Data API) is a market data-specific API running on top of OpenMAMA for “abstracting” quotes, trades, order books and option chains.
Although MAMA, OpenMAMA’s commercial predecessor, was developed for the financial services sector, where data rates are extremely high (millions of messages per second) and ultra-low latencies are essential, OpenMAMA can be applied in various industries that demand a high performance open messaging platform, according to the Linux Foundation.
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