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Elaine Wah

Modern Markets, Modern Metrics - A Blog By IEX

In this blog by IEX's Elaine Wah, the newest public exchange looks to refute public claims that the metrics it uses are designed to inflate its own volume numbers and mislead people.

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July 31, 2004

Speed, Programs and Algorithms

By Peter Chapman

Also in this article

  • Speed, Programs and Algorithms

The Talk of the Town at Annual Tech Fest

The official theme of this year's SIA Technology Management Conference & Exhibit was compliance, but for traders the buzz at the booths was over electronic trading.

The annual event, held in June at the Hilton New York, was packed with vendors and brokers promoting slice-and-dice trading software as well as ultra-fast data feed technology.

About 7,500 attendees - the same as last year - braved the near 100-degree New York City heat outside to chat with the pitchmen and women waiting inside. The pitch? Traders need fast, sophisticated software to cope in the age of penny ticks.

Blocks must be broken up and fed into programs, algorithms and smart routers. And speed, of course, is of the essence.

"With our technology," says Norm Friedman, vice president of Aegis Software, a new entrant in the program trading space, "a trader can send out orders within one millisecond of getting the tick."

Quote Change

That tick is an execution or quote change that triggers a trader's strategy. Many traders use computers to monitor the market for buy or sell signals.

In addition to its portfolio trading front-end, Aegis also sells a hook' that allows traders to take in and process their data directly from the market centers. The inflow can be faster than via the traditional market data vendors, Aegis asserts.

The vendor, celebrating its tenth anniversary, began life building protocol engines for FIX and the New York Stock Exchange's CMS, among others. Aegis then moved into testing, allowing brokers to test their trading strategies in simulated exchange environments.

The New York-based Aegis now has "under 10" clients for its AthenaTrader program trading system, including InTrade, a stat arb shop. Aegis joins the ranks of a small group of vendors and specialty brokers offering off-the-shelf program trading platforms. Competitors include FlexTrade, Portware and Spear, Leeds & Kellogg's REDIPlus division.

Not all players promoting program trading management systems sell ready-built software. Iris Financial, based in London, custom builds systems for the world's largest banks. The 15-year-old firm surfaced at the SIA show with the Sun Microsystems contingent to promote a new off-the-shelf fixed income program trading system.

Faster Delivery

But in equities, its technology is assembled from various modules to meet the specifications of Tier One banks in the U.S., the U.K. and Japan. The component approach was adopted five years ago when the consultant decided to make its assembly operation more efficient. "It's still tailored," says marketing exec Rebecca Bond, "but it's cheaper and delivery is faster."

Bond won't divulge the name of Iris' clients. But they are certainly huge. During last year's S&P 500 rebalancing one N.Y.-based user traded 300 million shares through the Iris system. On that day, the New York processed a record 2.6 billion shares. Iris supplied a support team' to help the broker cope with the volume.

The firm, with about 70 employees, provides trading technology to both fixed income and equity players. It recently received an $11 million investment from a venture firm. It will use the money to expand.