RTS Consultation

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Transcript of RTS Consultation

  • High Frequency Trading &

    Clearing and Settlement

    Presentation to EU Commission CESAME 2

    Tuesday 2 March 2010

  • Steffen Gemuenden CEO & Founder

    Mark van Vugt Executive Board Member

    Ed van den Brook Solutions Manager

  • Agenda

    1.

    RTS Introduction2.

    Our Customers

    3.

    Evolution of Trading in the last 20 years4.

    Definition of High Frequency Trading

    5.

    Risk Management & Limits6.

    Impact on Settlement & Clearing

    7.

    Q & A

  • Who is RTS..

  • RTS Realtime Systems Group

  • RTD TangoRTD Tango

    RTDRTD

    RTS Trading ApplicationsPerformance

    Stability

    Connectivity

    Time to Market

    Single Solution

    Multi Asset Class

    Buy / Sell

    Side

    Integrated Risk Management

    Automated Tools

    Algorithmic Trading

    High Frequency Trading

    ASP Hosting

    eRTDeRTD

  • System Architecture

    7

    ` Connectivity Central Comm

    Server Front-ends

  • ASP Hosting

    8

  • CMECBOTICENYMEXISEActive FinancialARCACBOEDGCXDMEeSPEEDHotspot FXFXMarketSpaceNYBOT

    Frankfurt

    Chicago

    New YorkLondon

    EURONEXTLIFFELSECMECHI-XSwiss ExchangesBAXTERTURQUOISENYSE Arca

    EuropeBATS TradingNasdaq

    OMX

    EUREXXETRAXetra

    ViennaSwiss Exchanges

    = Proximity Hosting

    SGX Der. (plan Q4 09)SGX Cash TSE Fut. TSE CashTSE Der.TocomTFXHK DerivativesHK CashMCX, NCDexNSE, BSESFEASX

    SingaporeTokyoHong KongIndia

    RTS net

    ASP Hosting

  • RTS Realtime

    Systems Group

  • RTS Offices

    RTS Offices

  • Our customersTraditional Investment Banks & BrokersProprietary Trading FirmsMarket MakersClearing FirmsExchangesHedge FundsStatistical Arbitrage Groups

  • Our customers

  • Evolution of Trading in 20 years

  • The evolution of trading in 20 years

  • The evolution of trading in 20 years

  • Definition of HFT

  • Definition of HFTThe natural evolution of trading

    From floor to screen (Step 1)From screen to Automation (Step 2)From Automation to Algo Trading (Step 3)From Algorithmic Trading to High Frequency TradingHFT Trading, a special form of Algo TradingComputer models instead of human beings

  • Algorithmic Trading UsersAnonymity 22%Cost 20%Trader productivity 14%Reduced market impact 13%Speed 11%Ease of use 7%Execution consistency 6%Customization 4%Other 3%

    Source: The Trade Annual Algorithmic Survey

  • 20

    RTD Tango

  • 21

    RTD Tango

    Tango paradigmTake your trading strategy and execute in proximity to the exchange(s)Experiment with trading ideas -

    accurate simulation safer than liveCan you describe it? Then you can build it

    Advantages of Tango Fast time to marketLow latency platformShort product familiarization timeframeStandardized exchange interactionIntegrates to risk platform (e.g.. limits / no short selling in specified stocks)Backtesting capability both in form of simulation and using collected full market

    Advanced integrationMathWorks / Excel add-in for external modelsIntegration to third party pricing / news feed data

  • HFT Traders

  • HFT Traders

  • The race to zero

    latency

  • HFT Traders

  • HFT Traders

  • The retail investor perspectiveHFT - LiquidityHFT - Very small Bid/Ask SpreadHFT - Co-Location advantagesHFT - Capital investmentsFake liquidity ???HFT Impact on large market movementsLiquidity disappears on large movements

  • The retail investor perspective

  • Who are the players

  • Who are the players

    Traditionally Investment BanksProprietary Trading FirmsLiquidity ProvidersArbitrageursHedge FundsStatistical Arbitrage GroupsSmall very sophisticated trading companies

  • Requirements

    Large investment in technologyProfitable algorithmsLarge Capital investmentsHigh trading limitsExcellent IT staffHigh-End Quants

  • 32

    Risk & Limits

  • Risk Management & Limits

  • Risk Management & Limits

  • Risk Management & Limits

  • Risk Management & Limits

  • 37

    Pre-trade hard limitsOrder Sizes

    Overall Positions

    Cash Limits

    Margin Limits for Derivatives

    Trading permissions

    Market access limits

    Spread Limits

    RTD Risk Management Set limits

  • 38

    Post-trade soft limitsReports on maximum loss intraday (value)

    Reports on maximum long and short positions (sum)

    Presented to risk user as warnings to trigger user interaction

    RTD Risk Management Set limits

  • 39

    Monitor order bookView active orders per customer or per exchange

    Filter / sort by exchange / instrument

    Interact as required to delete orders / deactivate from marketplace

    RTD Risk Management Monitor order book

  • 40

    RiskLimitViewMonitoring Limits Realtime

    Limit violations displayed

    Monitoring daily limits and P&L

    RTD Risk Management Monitor P&L

  • Risk Management & Limits

  • Risk Management & Limits

  • Impact of HFT on Settlement & Clearing

  • Impact on Clearing & Settlement

  • Impact on Clearing & Settlement

  • Q &A

    Slide Number 1Steffen GemuendenCEO & FounderMark van VugtExecutive Board MemberEd van den BrookSolutions ManagerAgendaWho is RTS..RTS Realtime Systems GroupSlide Number 6System ArchitectureASP HostingSlide Number 9RTS Realtime Systems GroupSlide Number 11Our customersOur customersEvolution of Trading in 20 yearsThe evolution of trading in 20 yearsThe evolution of trading in 20 yearsDefinition of HFTDefinition of HFTAlgorithmic Trading UsersRTD TangoSlide Number 21HFT TradersHFT TradersThe race to zero latencyHFT TradersHFT TradersThe retail investor perspectiveThe retail investor perspectiveWho are the playersWho are the playersRequirementsSlide Number 32Risk Management & LimitsRisk Management & LimitsRisk Management & LimitsRisk Management & LimitsSlide Number 37Slide Number 38Slide Number 39Slide Number 40Risk Management & LimitsRisk Management & LimitsImpact of HFT onSettlement & ClearingImpact on Clearing & SettlementImpact on Clearing & SettlementSlide Number 46