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A Smarter Monkey

In this contributed piece, TIM noted that some traders do better than others when using data that has been run through certain analysis - that is, have used some form of machine learning to assist them.

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August 1, 2012

Risk Checking in Under 500 Nanoseconds

By By Peter Chapman, James Armstrong

With the Securities and Exchange Commission's new rule banning naked access in place, an arms race has developed among trading systems vendors.

Each claims their platform is the fastest when it comes to risk-checking orders. Now New York-based Matrix Trading Technologies is claiming it can run an order through 41 risk checks in less than 500 nanoseconds. The trick, according to Matrix founder and chief executive Louis Liu, is his system's usage of field programmable gate array technology.

While most vendors use software to conduct the risk-checking process, Liu contends FPGA hardware is faster.

"It took awhile to make this available," Liu said, "but it is incomparable as far as speed."

The SEC's Rule 15c3-5 forces brokers to run their customers' orders through a slew of risk checks before sending them to the market. That is supposed to minimize the chances a rogue order will disrupt trading. The result is a scramble by brokers looking for technology that will check risks but not slow down their latency-sensitive customers.

Liu is an industry veteran who built one of the original direct-market-access platforms, Sonic Trading. The system was bought by the Bank of New York's institutional brokerage arm (now ConvergEx) in 2004.

Liu and Sonic co-founder Joe Cammarata spent about four years at ConvergEx before leaving to start Matrix in 2007.

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