Trading | Derivatives
“We are improving our low-latency capabilities to allow the processing of a large number of trades hitting the system at once.” David Little, Calypso
changes are already being integrated with some of the customers.
Unlike some standard trading tools we do a lot of integration with our customers in the back office, middle office and with risk. That’s not purely for trading purposes; it’s for position tracking, for risk, to handle workflow, so it is a lot more complicated than the trading part.”
The end result By trading futures contracts with fixed tenors, firms lose out on the flexibility of trading a swap; they are also committed to trading and clearing with the exchange operator that has issued the future. Dealing with multiple venues is pushing trading technologists to adapt their platforms further. “Software can’t be optimised for one exchange
anymore,” says Mike Glista, director of order routing at trading technology provider CQG. “We’ve been continuing optimising our systems to operate with certain hardware and trying to figure out what actually occurs at different exchanges. For example, at one exchange we are dealing with, it is better to do a cancel/new order than to run a cancel/replace. There is a lot of tuning to the particular matching engines for the higher speed trader.” Having a greater amount of choice also complicates the workflows that the trading systems have to provide processing for says
Best Execution | Spring 2013
Steve Grob, director of group strategy at platform supplier Fidessa. “At the front end you need to know how a euro swap will be traded alongside a bund on Eurex. Then that throws up issues around where you clear,” he notes. “Dependent upon your relationships with different clearing houses you may want to go down one path and not another. The concept is emerging that you might have the best price as one part of your calculation and then the optimal destination as another, when you take into account any potential risk or margin offset. That is a big part of the way the new workflow will look like.” To reflect this, the software vendors are giving people the tools to make those decisions, with a timely level of information and the flexibility to choose a path for execution.
“It comes down to being able to put all of these instruments in one place, and make your own decisions about their equivalence or otherwise,” says Grob. “Different firms have different views on how well one instrument could offset another. People will need the kind of intelligent tools to trade in and amongst different venues that we developed when multi-market structures emerged in the US and Europe, basically a combination of smarter order routing, algos and analytics. That becomes much more important as the number of destinations and venues grows, becoming more complicated and intertwined.” ■
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