RTS Consultation
Transcript of RTS Consultation
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High Frequency Trading &
Clearing and Settlement
Presentation to EU Commission CESAME 2
Tuesday 2 March 2010
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Steffen Gemuenden CEO & Founder
Mark van Vugt Executive Board Member
Ed van den Brook Solutions Manager
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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
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Who is RTS…..
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RTS Realtime Systems Group
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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
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System Architecture
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` Connectivity Central Comm
Server Front-end’s
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ASP Hosting
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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
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RTS Realtime
Systems Group
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RTS Offices
RTS Offices
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Our customersTraditional Investment Banks & BrokersProprietary Trading FirmsMarket MakersClearing FirmsExchangesHedge FundsStatistical Arbitrage Groups
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Our customers
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Evolution of Trading in 20 years
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The evolution of trading in 20 years
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The evolution of trading in 20 years
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Definition of HFT
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Definition of HFT“The 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
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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
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RTD Tango
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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
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HFT Traders
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HFT Traders
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The race to “zero”
latency
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HFT Traders
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HFT Traders
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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
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The retail investor perspective
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Who are the players
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Who are the players
Traditionally Investment BanksProprietary Trading FirmsLiquidity ProvidersArbitrageursHedge FundsStatistical Arbitrage GroupsSmall very sophisticated trading companies
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Requirements
Large investment in technologyProfitable algorithmsLarge Capital investmentsHigh trading limitsExcellent IT staffHigh-End Quants
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Risk & Limits
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Risk Management & Limits
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Risk Management & Limits
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Risk Management & Limits
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Risk Management & Limits
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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
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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
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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
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RiskLimitViewMonitoring Limits Realtime
Limit violations displayed
Monitoring daily limits and P&L
RTD Risk Management – Monitor P&L
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Risk Management & Limits
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Risk Management & Limits
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Impact of HFT on Settlement & Clearing
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Impact on Clearing & Settlement
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Impact on Clearing & Settlement
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Q &A