Commentary

Derek Edward Schloss
Traders Magazine Online News

What the !@#$ is a Security Token?

In this first part of a series, Mr. Schloss will begin to explain what a security token is by explaining how the building blocks of securities law are fundamental to understanding the tremendous value security tokens will one day unlock.

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January 1, 2005

Trading Strategies Made Easy

By Editorial Staff

Smith: I guess it would be. And also Yellowstone to some extent. But we don't like the idea of a black box. We believe in the transparent box. We've tried to build a high degree of transparency into all of our products. So the user can see exactly why decisions were made every step of the way. It is very difficult to de-bug a black box. Our stuff is a platform for trading ideas. Trading opportunities. So, if you have a trading idea and you want to find out why it had a certain P&L or why it created certain orders? Why did this happen? You need a transparent box, not a black box.

Traders: With Yellowstone, where does the data come from? Do you have feeds?

Smith: We are not a market data provider. We have adaptors to popular market data sources. The users have their own deals for the market data through the common vendors out there.

Traders: Do they use vendors or go direct to exchanges?

Smith: We actually have an adaptor to one of the exchanges, but I haven't seen anyone use that.

Traders: 4S.Everglades plugs into brokers?

Smith: Exactly. We connect to about half a dozen brokers through FIX. There are others we could connect to if clients wanted to go to them.

Traders: Can you mention a few of the brokers?

Smith: Credit Suisse First Boston's AES, Barclays Capital, Lehman Brothers. Fimat, the brokerage subsidiary of Societe Generale in France.

Traders: Is 4S.Everglades competition for brokers' algorithmic trading servers that execute against benchmarks such as VWAP?

Smith: Not really. The buzz around algorithms is good for firms like ours. For those customers looking to run alpha strategies, a product like ours can be used in combination with what [the brokers] are doing. They would use Everglades with an [CSFB] AES tag, for instance.

Traders: So 4S.Everglades execution strategies are different? Not just VWAP?

Smith: You can do that in Everglades. But our strategies...Do this when market conditions are such. Get a pair done in a ratio. Get an index done in this way. Get a basket done when certain conditions happen. As opposed to: get a basket done at VWAP. It is more opportunistic. I want to wait until the market hits this level, plus or minus some percent and then put in an order at some other price. I'm not saying someone couldn't write a sophisticated VWAP with our stuff. But that is not what they are coming to us for.

Traders: O.K. Thanks Steve.