By Simon Miller
When you think of trading, you may think of the bear pit of the trading floor where buyers and sellers meet and negotiate.
However, as technology grew with the introduction of the Nasdaq and the
creation of Chicago Mercantile Exchange’s electronic trading platform – and regulations were put in place to encourage lower costs and competition – words like algos and HFT began to become common place.
To give a taste of the growth in electronic trading, in 1992 the total CME trading electronically was 0.16 per cent, by 2009 this reached 80.29 per cent. Meanwhile according to figures from 23 stock exchanges worldwide, 70.11m trades were registered on European electronic order books in November 2011 alone, worth around €549,115bn.
The obvious advantage of electronic trading is one of reducing cost of transactions. Automation through the straight through process bring cost down to a stage where incremental costs are as close to zero as possible, increasing the economics of increased trades.
Another clear benefit is the opening up of the world to global competition.
Indeed, just locally, going electric has opened up a plurality of trading markets for investors. Five years ago, the New York Stock Exchange accounted for more than 70 per cent of trading in NYSE-listed stock.
However, that figure is now down to 36 per cent with the remaining market share divided between public exchanges, electronic trading platforms and “unlit” markets.
With barriers removed, a trader can simply press a button to reach the other side of the world while that globalisation process also allows for greater avenues of liquidity.
With electronic trading becoming increasingly important to traders so are the platforms with which they use.
With high frequency trading coming to the fore and the financial world being bombarded with regulations, it is important to find the right platform.
This issue sees the start of the Financial Risks Today rolling survey of vendors offering trading platforms. These snapshots aim to provide investors with a taste of what is available in the market place and will be updated quarterly.
The first snapshot shows that vendors are increasingly expanding their offerings globally to reflect clients’ tastes for opportunity in areas such as the Brics rather than the traditional trading markets of New York and London.
In addition, vendors are offering electronic trading in energy derivatives as well as the usual foreign exchange and equity markets.
Although the survey concentrates very much on the present, we also asked how vendors see the future.
The majority believe that tools and platforms will have to be developed to reflect increasing transparency and even greater reductions of costs. Tullet Prebon summed up many vendors’ feeling that there is a focus on developing platforms that “offer high levels of pre- and post- trade transparency, be connected to the relevant central counterparty and also to the recognised trade repository for the underlying product”.
While mobile apps are being looked at, many believe that trading
platforms need to automatically tailor themselves to a client’s needs, increasing productivity and efficiency.
SunGard commented that it was looking to continually evolve to “meet the ever increasing needs of a market place that demands electronic trading capabilities to be at the centre of the workplace”.
Risk management tools are also being offered reflecting the growing importance of risk following the financial crisis of 2008 and continued upheavals in the global financial world as we begin 2012.
Whatever this year holds, it is clear that vendors are reflecting the myriad
demands from their clients and, as the number of trades go seemingly ever
upwards, more tools are required to satisfy regulator, politician and
Trading Platforms Survey
About: Global provider of energy trading and risk management software for power and gas utilities, refiners, producers, traders and commodity consumers.
Platform: The provider offers the Allegro 8 platform managing the complex logistics associated with physical commodities such as coal, crude oil, natural gas and refined products. Allegro offers more than 40 components for key functionalities including risk management, trading, compliance and control.
Spread, analytics and risk: With over 3,500 users in North America, South America, Europe, Middle East and Asia, Allegro offers platforms in both primary and secondary markets with real-time data analysis algorithmics – including simulation, optimisations, and a full set of risk tools and metrics.
About: A technology and transactions services provider specialising in offering low latency market data and trading platform solutions. It provides Equiduct, a pan European trading platform,offering the highest likelihood of best execution for the retail market.
Platform: Equiduct has two interacting trading segments: PartnerEx – an European trading platform; and HybridBook – an ultra-low latency lit order book.
Spread, analytics and risk: The company offers trading in Belgian, Dutch, French, German Portuguese, Swiss and UK equities and offers a secondary market on pan-European equities. It provides real-time stream of pre- and post-trade data.
About: FTEN is a NASDAQ OMX company, that provides market participants with transparency and control over their global trading activity.
Platforms: FTEN offers a platform that includes five major components: RiskXposure – real-time risks management data cloud; SignalXpress – real-time and normalized market data feeds; elocityXpress –true-flow control for all business scenarios; TradeXaminer – real-time surveillance and monitoring technology; and Regulatory reporting and data warehousing.
Spread, analytics and risk modeling: FTEN has offices in US, Hong Kong and London and a regionaly office in Canada with global clients. It can connect to any major liquidity destination and any secondary liquidity destination. It also offers aggregates on all data flows in real-time and through FTEN RX a real-time enterprise risk management framework.
About: ITG is an independent agency research broker that partners with asset managers globally to provide innovative solutions spanning the investment continuum.
Platforms: Triton, a global multi-asset execution management system offering brokers neutral access to global markets and algorithms.
Spread, analytics and risk modelling: Triton is offered globally through asset managers serving Europe, Americas and Asia primarily set up for traded listed equities and derivatives products. Triton also offers access to a broad range of secondary markets and to a wide variety of dark pools. Its ITG ACE proprietary cost model allows for real-time analytics. Algorithmic trading tools are available with anti-gaming logic and incorporates a number of risk management measures.
About: MarketAxess brings over 10 years of unparalleled trading, market data and technology innovation to the global
institutional credit markets.
Platforms: MarketAxess operates an electronic trading platform that enables investment industry professionals to efficiently trade corporate bonds and other types of fixed-income instruments.
Spread, analytics, risk modelling: Over 800 institutional investors are active through 80 broker-dealer clients worldwide operating in the Americas, Europe, Asia and Middle East. The company offers fixed income e-trading for the secondary market and through BondTicker offers real time data and provides bulk data feeds.
About: Otkritie Capital is the investment banking arm of Otkritie Financial Corporation offering private investors, institutional and corporate clients a full range of investment and banking services on the global and Russian markets, DMA trading, services related to M&A deals, equity and debt financing, as well as services connected with structured products and derivatives.
Platforms: Otkritie offers four front ends for cash and derivative trading although they are technology neutral and will connect to any EMS/OMS or any network via Fix.
Spread, analytics, risk modelling: Its main trading areas are in the UK, Russia, Germany and Cyprus. Having opened an office in New York it plans to open an office in Hong Kong next year although its coverage is global offering access to over 20 derivative markets worldwide. The company is a global market DMA provider in equity derivatives and FX and operates basic execution algorithmics. It also has a partnership with Quanthouse which Otkritie provides low latency market access to Russia.
About: Patsystems provides high-performance electronic trading and exchange systems, comprehensive risk management tools and connectivity to global markets from a single screen.
Platforms: The company offers three platforms: Risk Informer – standalone multi-asset class post trade risk management software; OMS – Global ASP; and Matching Engine – a low latency trading engine.
Spread, analytics, risk modelling: It operates throughout Europe, US and Asia offering multi-asset primary markets in equities, futures and options, swaps and FX and secondary markets in CFDs and associated price feeds. It offers aggregates trades and margin requirements and manages risk in both pre- and post-trade.
About: Quantifi provides analytics,trading and risk management software for the Global Capital Markets.
Platforms: The company offers six platforms: Quantifi Risk – a turn-key trading and risk management solution; Quantifi XL – pricing and structuring OTC products solution; Quantifi Counterparty Risk – active management of counterparty risk; Quantifi CVA – CVA pricing for OTC products; Quantifi Toolkit – price modelling; and Quantifi Analytic Service, – service orientated interface supporting modelling and scenario calculations.
Spread, analytics, risk modelling: Fifteen countries and five continents with offices in North America, Europe and APAC region. Its products are used in the primary market by sell-side firms that need to manage risk and also in the secondary markets by buy-side
About: Saxo Bank is an international investment bank specialising in online trading and investment across global financial markets.
Platforms: Saxo Bank offers three products: SaxoTrade – downloadable client system; WebTrader – browser based web interface; and Mobile Traker – browser based for mobile technology.
Spread, analytics, risk modelling: Saxo Bank has offices in 18 countries with clients in over 150 countries, with primary market offerings of margin FX and CFDs on an OTC basis plus connectivity to most of the world’s largest exchange for stocks and futures. It streams updates to trading platforms at three times per second and has a full overview of current holdings and exposures in real time.
About: SunGard Financial Systems provides mission-critical software and IT services to institutions in virtually every segment of the financial services industry.
Platforms: The company has three platforms: Front Arena – electronic trading and position controls across multiple asset classes; Sierra – FX and treasury solutions for buy and sell side financial institutions and BondOne – a real-time fixed income front office trading and distribution solution.
Spread, analytics, risk modelling: Front Arena and Sierra are global propositions, BondOne serves US, Canada and Europe. Both Front Arena and BondOne support primary markets and secondary markets. In addition, Front Arena supports real-time data analytics and all offer risk management systems. Front Arena offers native execution algorithms as well as order management capabilities centred around an internal market.
About: Tullett Prebon operates as an intermediary in wholesale financial markets facilitating the trading activities of its clients, in particular commercial and investment banks.
Platforms: The firm offers five trading platforms: tpTRADEBLADE (FXO) 130 pairs with global rates in AM straddles and risk reversals; REPO – Repo markets; SWAPSDEAL – electronic/voice hybrid solution for all interest rate swaps; ENERGY – Hybrid trading platform for North American energy product options; CDS and Cash bond platform - EMEA cash bonds and CDS.
Spread, analytics, risk modelling: FXO, Repo, and Swaps operate in EMEA, North America and Asia while energy covers EMEA and North America while Credit is EMEA-based. Tullet Prebon also offers tpMatch, an algorithmic electronic FRA matching platform that enables traders to reduce their LIBOR fixing risk and tpQUICKDEAL while offers them real-time electronic trade marching across a variety of asset classes. It also operates an electronic algorithmic risk matching business currently operational in three different asset classes
About: UBS Investment Bank provides clients with expert advice, innovative solutions, outstanding execution and comprehensive access to the world’s capital markets.
Platforms: The investment bank offers UBS Delta for managing and optimising portfolio risk and performance with analytics provided for instruments across multiple markets and asset classes from fixed income, equities, FX and commodities including a full range of derivatives.
Spread, analytics, risk modelling: A global spread offering real-time analysis and risk models including VaR and ex-ante tracking error. It also offers analytics including duration, convexity, spread duration and equity valuation measures.