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Some Like It Hedged

BNP Asset Management's Pojarliev discusses a variety of options to address foreign currency exposures. Although there is no single best-practice solution for addressing foreign currency exposures, institutional investors have three main choices, he says.

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June 30, 2003

More Tools for Traders

By Peter Chapman

Flume Data was promising data delivery two to three seconds faster than the traditional suppliers. That appeals to black box quants, said Flume president David Lawless. Quants, such as stat arb traders, need speed to catch momentary market pricing discrepancies.

Traders typically buy their data from the big four vendors: Reuters, Bloomberg, Thomson and Bridge. Flume is faster, according to Lawless, because, in processing, it eliminates a couple of steps. The traditional vendors typically compress their data in order to keep down transmission costs. But due to the steep drop in the cost of bandwidth over the past six years, compression is no longer necessary, Lawless said.

Flume takes in equity data from the NYSE, AMEX and Nasdaq. It takes in options data from OPRA. The feed is used by one large investment bank and one large brokerage, according to Lawless. He would identify neither.

Database supplier Kx Systems was plumping for kdb+, the latest and fastest iteration of its flagship database product. The upgrade takes advantage of the new Itanium chip from Intel to process two billion ticks per day. That's up from 32 million in the previous version. Kdb+ can retain one day's worth of market data in memory. The technology is in beta testing in Lehman Brothers' equity trading department.

The increase in power and speed is necessary, said sales exec Mike O'Neill, due to the surge in trades and ticks in recent years. The growth in ticks is due to more auto-trading, program trading, and stat-arb trading.

Kx's database technology is used mostly by black box traders to crunch TAQ data from the New York Stock Exchange. But, O'Neill said, it also processes Nasdaq Level Two data. That only became available in the past two years.

The technology allows quants to test trading strategies against historical data in real-time. A trader can compare current market conditions to previous conditions to learn whether a particular trading strategy might be profitable. The technology also allows for back-testing. A trader can develop a model - if IBM goes up, for instance, then buy Microsoft - and test his theory against historical market data.

Fidelity Capital Markets is also using kdb technology on its New Jersey-based program trading desk.

Program Trading Front-ends Proliferate

Two newcomers are hoping to ride the program trading boom. One is InfoReach. The Chicagoland vendor started out life building FIX engines in 1996. It now has 200 clients. In 1997, it built an OMS. Now its onto basket trading front-ends. Called El-Trader, the new system costs $3,000 per month per user. That's a bargain, according to InfoReach execs.

El-Trader accommodates program traders needing to automate much of their analysis and trading. An "event" like a price move will trigger a trader-designed analytic. The result of an analytic is an order or strategy.

Orders can be sent in pieces at intervals decided on by the traders. Ten percent of the order, for example, can be sent every five minutes until the trade is done. The system takes in data from equities and derivatives markets. InfoReach says business has picked up - enough to merit opening a New York sales office.