TMPA-2015: Reference Test Harness for Algorithmic Trading Platforms
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Transcript of TMPA-2015: Reference Test Harness for Algorithmic Trading Platforms
Quality Assurance & Related Software Development for Innovative Trading SystemsTel: +7 495 640 2460, +1 415 830 38 49www.exactpro.com
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• Introduction• Regulators’ requirements• Test Harness for Algorithmic trading system• Minirobots• Algorithmic Test Agents• Technical Criteria• Business Criteria• Conclusion
Agenda
Quality Assurance & Related Software Development for Innovative Trading Systems Tel: +7 495 640 24 60 , +1 415 830 38 49 www.exactpro.com
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Introduction
Flash Crash in 2010
The Knight Capital runaway algorithm disaster in 2012
SEC ESMA
Conducting testing: confirmation that core code components operate as intended and do not produce
unintended consequences
Clearly delineated development and testing methodologies
Quality Assurance process should be separated from any development work
Testing methodologies should include performance simulations / back-testing and non-live testing within a trading venue testing environment
Periodically evaluating test controls Ensure that tests are commensurate with the risks that this strategy may pose to itself and to the fair and orderly functioning of the markets operated by the trading venue
Data integrity, accuracy and workflow validation Periodically evaluating test controls
Recording of all testing protocols and results Conducting all testing in a development environment that is segregated from production
Investment firms should ensure that the production and testing environments are kept segregated at all times
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Regulators’ requirements
5 Exactpro Systems, LLC Quality Assurance & Related Software Development for Innovative Trading Systems Tel: +7 495 640 24 60 , +1 415 830 38 49 exactpro.com
Test Harness for Algorithmic trading system
6 Exactpro Systems, LLC Quality Assurance & Related Software Development for Innovative Trading Systems Tel: +7 495 640 24 60 , +1 415 830 38 49 exactpro.com
Test Harness for Algorithmic trading system
7 Exactpro Systems, LLC Quality Assurance & Related Software Development for Innovative Trading Systems Tel: +7 495 640 24 60 , +1 415 830 38 49 exactpro.com
Test Harness for Algorithmic trading system
8 Exactpro Systems, LLC Quality Assurance & Related Software Development for Innovative Trading Systems Tel: +7 495 640 24 60 , +1 415 830 38 49 exactpro.com
Test Harness for Algorithmic trading system
9 Exactpro Systems, LLC Quality Assurance & Related Software Development for Innovative Trading Systems Tel: +7 495 640 24 60 , +1 415 830 38 49 exactpro.com
Test Harness for Algorithmic trading system
10 Exactpro Systems, LLC Quality Assurance & Related Software Development for Innovative Trading Systems Tel: +7 495 640 24 60 , +1 415 830 38 49 exactpro.com
Test Harness for Algorithmic trading system
11 Exactpro Systems, LLC Quality Assurance & Related Software Development for Innovative Trading Systems Tel: +7 495 640 24 60 , +1 415 830 38 49 exactpro.com
Test Harness for Algorithmic trading system
12 Exactpro Systems, LLC Quality Assurance & Related Software Development for Innovative Trading Systems Tel: +7 495 640 24 60 , +1 415 830 38 49 exactpro.com
Test Harness for Algorithmic trading system
13 Exactpro Systems, LLC Quality Assurance & Related Software Development for Innovative Trading Systems Tel: +7 495 640 24 60 , +1 415 830 38 49 exactpro.com
Minirobots
Item DescriptionTesting Type Active Multi-Participants (applicable for testing at the confluence of functional and
non-functional testing)
Target SUT Trading Platforms and Market Data Delivery Systems
SUT Interface Back-end (typically connected to message gateways / APIs, and DBs); GUI Testing Capabilities supported via plug-ins to other tools (e.g., Selenium)
SUT Interaction Method
Message injection and capture to emulate multiple participants’ activity in electronic markets (essential when there is a need to reproduce complex scenarios that can be created by trading algorithms)
Protocols Extant plug-ins for Industry-standard (FIX and dialects, etc.) and proprietary protocols. New plug-ins for additional protocols developed by request
Test Scripts Multi-threaded Java code specifying different liquidity profiles
Test Management, Execution and Reporting
Integrated (Web front-end), allows for multiple simultaneous heterogeneous connections, concurrent emulation of multiple participants, detailed test reports. Optional Big Button framework supported
Platform requirements Low footprint cross-platform application, MySQL or other RDBMS
1. Arbitraging and Market Making Minirobots
2. Minirobots emulating ‘Slicing’ algorithms
3. Minirobots emulating ‘Synthetic’ algorithms
4. Exchange simulated orders
5. Aggressive buyer/seller (Market panic scenarios)
6. ‘Bandit’-algorithms• ‘Layering’• ‘Quote-stuffing’• ‘Painting the tape’• ‘Abusive liquidity detection’
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Algorithmic Test Agents
1. Functional criteria
The smaller number of existing errors an algorithm contains, the lower the expectations of potential losses and fines are.
2. Non-Functional criteria
• Performance• Scalability • Reliability• Efficiency • Recoverability
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Technical Criteria
Shsha
1. Price • execution• price improvement• spread capture
2. Cost • explicit• market impact• adverse selection
3. Probability of execution
4. Implementation Shortfall (IS).
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Business Criteria
Thank you!
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Q&A