Automated Trader Magazine Issue 12 Q1 2009
One of the really great things about this global economic catastrophe is that not everybody has picked up on the idea that it’s fashionable to be gloomy. You’ll find some really happy Heads of FX here , and one very happy exchange CIO/CTO here . Dennis Lohfert talks about the Ion Fund’s successful first year here , and then we get down to the mechanics of making money in 2009 with our feature on the five drivers of profitability here . We’ve got our big cover story on getting partnerships right, here – crying may not be necessary after all – and then Helen Sanders gets into the really difficult but timely question of recruitment here . As the day job gets ever more complex and the technologies ever more sophisticated, you do agree, don’t you, that it’s time to think outside the usual boxes on hedging your “talent risk”?
We’ve got some of that sophisticated technology in the second half of this issue, with a feature by Martin Gymer and our founder, Andy Webb, on one high-profile solution to the problem of volatility inputting ( here ), and right in front of that ( here ), a thought-provoking discussion led by Anita Hawser around the limits of machine intelligence. Models can be sentimental sometimes, it seems. Our Anatomy of an Algo feature this month ( here ) takes us on a nail-biting ride through an FX trade that nearly – no, I won’t spoil the ending. You’ll find our regular Alphability trading metrics here , and yes, that is Shaun Downey rummaging through the trash back here .
Just space to mention Peek Ahead here , where our anonymous futurologist suggests that if you’re running an algo that trades off news (and/or sentiment), this might be a good time to think about how you’re going to factor in rumours of the end of the world (due in 2012), which might well have a negative impact on global markets.
But hey – you’ve got some reading to do before you worry about that.
Enjoy the issue.
- Hard and Fast?
This is an extended version of the Tech Forum that appeared in the Q1 2008 edition of Automated Trader. It includes an additional interviewee and expanded answers from all interviewees on the latest techniques for hardware and networking infrastructures.
- The F Word
If there's one word that sums up all the past few years’ changes in the way we do business, it’s fragmentation. It happened in the US, it’s happening now, post-MiFID, in Europe, and as regulation evolves and venues proliferate, the signs are that fragmentation is going global. It’s pervasive, it’s driving strategy development and technology investment, and now, it’s even got its own index. William Essex, editor of Automated Trader, spoke to the man who masterminded the Fidessa Fragmentation Index (FFI) and now writes the FFI blog* – Steve Grob, director of strategy at Fidessa
- Perfect Partners?
Do partnerships add value? Really? Are you sure? How much value? As the Automated Trader editorial inboxes clog up with more and more news releases about exciting new partnerships, William Essex wonders, is this really the most effective use of time and resources?
- Me and My Machine: The Automated Trader Interview
Launched in November 2007, the Ion Fund is “a 100% systematic fund designed to operate in highly liquid and listed instruments” [major stocks, stock indices, government bonds and currencies]. It came through 2008, the year of vanishing liquidity and corporate bail-outs, with a net 2008 return of 24% (fund objective: an uncorrelated 20%pa). How does a fund like that provide a return like that in a year like that? The Ion Fund’s manager Dennis Lohfert spoke to Automated Trader’s Editor, William Essex, about achieving outperformance in interesting times.
- The Five Drivers of Profitability
If speed isn’t everywhere, it’s nowhere. Phil Perkins, Ben Van Vliet and Andy Kumiega of the Institute for Market Technology argue that achieving a strategic alignment of trading, operations, and technology is a key factor in delivering competitive advantage.
- Hired Guns
Hedging your talent risk could mean employing games enthusiasts with recent weapons training, says Helen Sanders
- Cash and don't carry?
Has the global economic crisis impacted on the FX market, and if so, how has that affected trading strategies? William Essex went in search of easy volatility.
- Fast-tracking the e-evolution of fixed income
Agility and visibility are essential in today’s turbulent and fragmented market, says Oliver Estenfeld, Head of Business Development, icubic. That goes for fixed income as well as equities and FX.
- Ice Age
Capital and credit markets may be freezing over, but that seems to suit ICE just fine. With buoyant trading volumes and a major new release of the exchange’s trading platform due this spring that will incorporate significant new options functionality, Automated Trader found Edwin Marcial, ICE’s CIO and CTO, in a relaxed mood.
- The thinking machine's man … or woman
By comparing the distant past with the economic-crisis-ridden present, Anita Hawser argues, lessons can be learned for the future deployment of automated and algorithmic trading functionality. Should machines be taught to discuss their feelings, or are they better off leaving the sentiment to us and sticking to the numbers?
- Keeping your vols on the straight and narrow
Automated option quoting engines are heavily dependent on someone or something inputting the correct volatilities behind the scenes. Get that wrong in these days of high frequency automated trading models and you’ll quickly be arbed off the face of the planet. Martin Gymer and Andy Webb take a look at a service designed to keep your vols in order – SuperDerivatives’ VolSurface.
- Dual Dollar Drama
Brian Coffaro, product manager for futures and foreign exchange at Bloomberg Tradebook, outlines the use of an FX algorithm to take a short position in AUDUSD.
- Going Green
If you are looking for an order execution edge, the solution may already be sitting in your dustbin. Shaun Downey explains the practicalities of recycling your stale alpha models for algorithmic trading.
Automated Trader’s proprietary tradability metrics are environmental statistics intended to assist those building trading models/systems in determining which markets and timeframes are most favourably responsive to which generic types of model.
- That cat's still breathing!
Has anybody told the news feeds that it's all over?