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Algorithmic TradingandTrading PlatformSergey Troshin, Ph.D.EXANTE. Directorst@exante.eu www.exante.eu SSE, Riga, Jan 2015ContentsEXANTE history and Unique Selling Points (5 min)Trading. Manual. Automatic - well known approaches (30 min)Broker inside out - technical aspects (30 min)Questions and Answers (15+ min)Working in EXANTE

EXANTE History

Global HedgeCapital Fund by EXANTE founders

2007NovemberFrustration with brokers increasesslow!limited products!primitive!not flexible!

2007

2010

Brokerageplatform startsnamed EX ANTE

2010January

EXANTE founded and issued European license

2011March

6 OfficesCoverageFiFixed IncomeFtFuturesOpOptionsFnFundsBfBitcoin FundStStocks & ETFsFxFX & Metals

EXANTE Platform

inin

ATP

out

Customized backoffice reporting

API(FIX)

Platform

300 +ServersTrading. Manual and Algorithms.Steps to ExecutionChoose Markets and SymbolsMarket Analysis and Decision MakingExecutionPnL and Account Control

Go back to step 1 and 2Manual TradingInstrument Search

Market Analysis

Execution

Account Summary and PnL

Algorithmic TradingAlgorithmic tradingAutomatic tradingHFT high frequency tradingAlgorithmic Trading20How does Execution Works?Order driven market model

Market OrderLimit Order

21Automatic tradingBuy-sideSell-sideStatistical arbitrageVWAPMarket Making / HFTTrend followingArbitrageSmart order routingWell Known Strategies. , - , order routing. buy side.

buy side , . 22Automatic tradingMarket Making and Scalping

23Trend FollowingTechnical AnalysisSMA / EMAMoving Average Convergence/DivergenceBollinger bandsStochastic oscillatorParabolic SARRate of Change (ROC)Relative Strength Index (RSI)etc

24Mean Reversion

25Volume Weighted Average Price

Volatility and Option TradingImplied volatility prediction

Delta neutral portfolioBuy option / sell stock on volatility going upSell Option / buy stock on volatility going down

Various options strategiesStraddleStrangleButterflyEtc.

27Arbitrage Strategy ExampleGAZPRU(MICEX)On new tick:

ogzd_rub = convert(ogzd, usd_rub)spread = normalize(ogzd_rub/gazpru)changedSpread()OGZD(LSE)USD/RUB(FOREX)LIMIT (LSE)London Server

Filled (size)MARKET (MICEX)Filled (price)On change spread:if (spread > threshold) place_limit(OGZD, price, size)On limit fill:If (limit_is_filled) place_market(GAZPRU, size)Parameters: threshold

Another example: S&P stocks on NYSE and NASDAQ in NY against Futures on CME in ChicagoPairs Trading and Statistical Arbitrage Market neutral portfolioShort one set of stocksLong another setRebalance very often

Pair TradingCoca-Cola (KO) and Pepsi (PEP)Renault (RNO) and PSA Peugeot Citroen (UG)

Statistical ArbitrageUp to 1000+ stocks in portfolioHuge quantitive calculations29How to Compare Strategies?

30Which is better?StrategySharp RatioCalculationsHFT / Delay Sensitive?Trend FollowingMean revision

BadEasyNoVolatility TradingBadHardNoArbitrage / Pair tradingGoodEasyYesStatistical ArbitrageGoodHardYesMarket MakingGoodEasyYes31Building Your Own Algorithm .32Historical Data . , .

, , time stamps timestamps order book, . , , , , .

33Data Rendering

Huge VolumeProcessing SpeedTechnical analysis panopticon.com ? , (), , , .

: 2011 ... .- :169 ( 18 )- :62 996 080- ( bid/bid size/ask/ask size):65 094 177

/

34Guess and Knowledge . , .35Approval. Pre-trade Analysis , -? ( ?) equity (, GPU)

36Backtest ResultsParam 1Param 2IncomeExpensesX1Y110%4%X1Y215%11%XnYn5%2%Execution with:same input datadifferent set of parameters valuesAlgorithm Creation Cycle38Technical Background

300 +Servers->What is located on servers?

-> Where are other exchanges?

-> Where FIX server is located?-> What is algorithm?

FIX Server LocationOne exchangeLow latency algorithmExchange data centerNo special requirementsBack up data center or any random data center

Several exchangesArbitrage with low latency algorithmExchange data center (exchange depends on algorithm) Dedicate link to other exchangesNo special requirementsAny data center (non exchange preferably)Common Internet link

Creating an AlgorithmAny programming language3rd party softwareRun algorithm on your server or in brokers VMControl through the trading terminal

Trading TerminalMarket AnalysisManual tradingFIX orders controlAccount control-> What about other servers?

Trading Data and Client Accounts Processing+ DEMO environment+ Development servers

Have a Strategy?Ready For Production?Choosing a Broker

49GeneralExchanges/Markets coverageTrading volumesRegulation issuesLegal issues

Commissions and fees

Technology51NEXT GENERATIONPRIME BROKERQuestions?

Portomaso Business Tower, Level 7, ST. Julians, Maltainfo@exante.eu | st@exante.eu | www.exante.eu

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