FOREX TECHNOLOGY
ability to use the data and make sensible decisions and analysis based on it.”
Data issues
All of this throws up challenges such as deciding what data a firm is going to subscribe to and which to ignore, since it’s probably not going to be practical to subscribe to all the data out there. One has to decide too what data needs to be retained and what can be discarded.
Trenner adds: “A firm is also going to have to clean the data that they subscribe to, as well as having to evaluate what quantity of data to blend or to aggregate. For example, how many levels of liquidity are you going to choose to blend in. And, finally what periodicity of data to use for writing and driving your algorithms.” Storage is another issue.
Te use of tick data with many tick updates per second requires a computer program to back test trading ideas. And, at some point there could be a certain constraint on how fast back testing calculations - relevant to each second - can be performed for say a month or even a year’s worth of data. Trenner points out that while a firm could opt for a one second ‘moving average’ data analysis, this is not quite the same as the real FX market, which is updating tick by tick.
While an answer might be arrived at far sooner, that begs the question: Is this a better answer or a worse one?. “It’s obviously not going to be the same as a tick by tick answer,” Trenner says “It might prove a better answer since the data has been smoothed and ‘noise’ in the data has been removed. However, it might be a worse answer as smoothing data makes it unrepresentative of the real market.” While the answer may lie in the data itself, the question fundamentally becomes what is the best way to structuring, cleaning and sampling the data. “Te only way of determining that to a point that brings satisfaction is to test different strategies. Yet that’s a time consuming processing and technically quite challenging, because if your systems are set up incorrectly they’ll just run too slowly to be usable,” Trenner contends.
Relevance
Trenner comments that: “What architecture an institution utilises depends on the complexity of the calculation, the quantity of data that has to be calculated and how critical speed is. While it’s fair to say that faster is absolutely better, there is a
74 | april 2011 e-FOREX
Minor Huffman “Te two main challenges we see are
processing delays with micro-bursts of market data and bandwidth constraints, especially during market events. We’ve seen many examples where a client’s bandwidth requirement increases by an order of magnitude during a market event.”
diminishing law of returns in general. For example, if you have a process that runs in one second, there may be a significant difference if you can run that process in 30 milliseconds (mls). But if you have a process that is running in 30mls, it may make only marginal difference if you can run it in 1mls. Still one could still miss out on the prize. Tis situation does not generally arise in FX since there is always somebody else making a price just behind the person who is making the present price.”
Bart Res, General Manager in Europe, Nexaweb, commenting on the challenge of understanding what data is relevant to a trading firm’s business and their services, says: “At the end of the day, it boils down to understanding how data requirements can be fulfilled in the most cost efficient and effective way -
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