Trading Tech Talk

CTO Interview: Today we are joined by Paul Giedraitis, Principal at Neurensic.

They discuss:

• An overview of Paul's background in the trading technology space?
• What is Neurensic?
• What sort of market manipulation can Neurensic's software detect? Spoofing? Layering? Other?
• It is bizarre that an old exploit like spoofing has become such a hot button topic in 2016.

Hot Topics in Tech: What is going on in financial technology?

CFTC signals retreat over 'source code' repository.

• The US futures regulator has signaled a willingness to back down on controversial proposals allowing it to freely access the source code of high-speed traders, following complaints that it could lead to sensitive intellectual property being revealed.

SEC brings new charges over global press release hacking scheme.

• The U.S. Securities and Exchange Commission has charged nine new defendants over what it has called a more than $100 million international scheme to hack into newswires that distribute corporate press releases and to use stolen information to conduct insider trading.

Robots are reading trader chats to stop the next wave of bank fines.

• Robots are automating yet another bank job: the task of sifting through traders’ messages to spot foul play, a process currently carried out by legions of human employees.

Do not give away the store when enabling APIs.

• Application programming interfaces, which have been available but in a limited manner, are used to let different software applications communicate and exchange data with each other.

Hot Topics in Tech: What do you need to know about financial technology?

• A technical glitch postponed the start of trading in futures and options contracts on Eurex by more than two hours, the latest in a run of breakdowns by exchanges.
• Exchanges around the world are avidly wooing high-frequency traders, those controversial speed demons of Wall Street. Despite the often explosive debate over this kind of trading in the U.S., bourses in Mexico, Turkey, South Africa and beyond are trying to lure HFT types to boost business.
• China, perhaps the last big obstacle to high-frequency trading achieving global dominance, where tight government rules, a stamp duty on stock trades and market inefficiency have so far kept out the algobots. High frequency share trading, which favors “predatory strategies that queue jump institutional and retail investors”, is having a toxic effect on Australia financial markets, according to researchers at the Business School.
• NY AG preps case against Credit Suisse dark pool - New York Attorney General Eric Schneiderman is preparing a civil case against Credit Suisse AG (CS).
• CMEs power of electronic trading let it acquire Nymex: The importance of technology was demonstrated again when CME saved Nymex from disappearing.
• A new report by regulators admits that there was an unusual amount of "self-trading" leading up to the October 15 bond market flash crash. The Treasury market, officially, had its own flash crash.

The Inbox: Listener questions and comments

• Question from GG: Has there ever been talk of some sort of technology glitch or shutdown futures? In the wake of the NYSE problems it seems there would be a fertile market for such a product. Firms could hedge themselves against system risk. Please discuss.
• Question from Eli Minn: Good discussion of the NYSE meltdown. I came away from it agreeing that tech actually saved the day. I guess fragmentation is good for something after all.
• Question from TJD: I know you guys were joking when you talked about HFT boats and blimps. But has there been any serious application of drone tech in the trading world? I have seen them used for combat, photography, movie-making, science experiments and more. Why not trading?

Hot Topics in Tech: OCC to consider tech overhaul. Virtu hopes time can heal HFT furor. Study by CFTC official questions legality of HFT practice. City of London "black book" is called for to track "bad apple" traders. Physicist says it is possible to use ships to facilitate high-frequency trading.

The Inbox: Listener questions and comments

• Question from Anthony J. - Hello Mark and Henry. I very much enjoy the program and your insight into this marketplace. I have a question about options data. You have mentioned on other programs an explosion of data and messaging. People always talk about a ceiling for exchanges. But I have to wonder if we are approaching some sort of theoretical limit on how many options series can be listed. Every new issue has hundreds or even thousands of strikes with both calls and puts. That is a tremendous burden for any platform to update in a real time basis with every tick of the stock. At what point do traders simply throw up their hands and say "no mas."
• Comment from Mark Brant - Thanks Henry + Mark for info about "shows", and thank 4 the free flow data on TOI.com and The Top Ten from Trade Alert. Why would the Russians do something so stupid? Their economy is shot already, cyber terror would pulverize it!
• Question from Vargo - The derivatives markets pose a number of significant challenges from a technology standpoint. There has been a tremendous expenditure to create systems to model so many disparate classes and update them with every tick of the underlying. Have we we seen any spillover of this amazing technology to other industries or areas?
• Question from Shadowbox - Is it feasible to use GPS to increase the timing accuracy of data stored by firms and provided to regulators? Or is GPS not fast or accurate enough to meet the new 50ms standard proposed by Finra?

Trading Tech Talk 20: Real-Time Risk and Margin in the Cloud

CTO Interview: Today's guest is Robert Newhouse, CEO, Victor Technologies. He gives an overview of his background in the derivatives markets, and what he does at Victor Technologies. Enhanced analytics, Difference vs. Hanwick, GPU acceleration, and DJALI application.

Hot Topics in Tech: Cyber risk is a top concern, 84% tell DTCC. Financial technology sector complains of lack of bank services.

The Inbox: Listener questions and comments

• Question from Analagus: bit of a thought question for the TTT hosts. Who has an easier road to profit - an algo inclined trader who does not know how to program vs. a programmer who wants to trade?
• Question from George B., Los Angeles: My question is for Trading Tech Talk. I skipped FIA Chicago this year because I could not fit it into my schedule. But it's always a good show to get a read on the trends in tech for the coming year. The exhibit hall is one of the biggest I have ever seen. I know Mark probably attended since he's local, and perhaps the other hosts as well. Just curious if you could give a rundown for those of us who missed it as to the major tech themes coming out of the event.
• Question from Objectivist C: For all tech-related spends at firms has always been build v. buy. Seems like the answer typically fell on the build side if you wanted a competitive edge and to utilize proprietary systems or strategies. But with budgets being stretched much farther these days and upgrade cycles being extended do you foresee this trend shifting toward buy in the future? Particularly as popular trends like cloud adoption democratize access to powerful systems?

CTO Interview: Today we feature special guest co-host Peter Maragos, CEO, Dash Financial.

Catching up with Dash:

• When Peter was last on Dash had just acquired the LiquidPoint business from Convergex with the help of private equity firm GTCR. Now they've just partnered with Flexpoint Ford, another PE firm. What was the impetus behind the second transaction?
• Dash has an impressive suite of diverse products and services - smart order routers and algos, the Dash360 analytics platform, trading workflow tools, an options ATS and even human traders.
• What are the upcoming projects/initiatives at Dash?
• Peter's views on crypto trading

Hot Topics in Tech: Smart Routers

• Today's topic was inspired by the following listener question: Question from See16: Can you please do a deep dive into smart routers on a future program? They are the secret sauce of the market these days but no one really seems to understand how they work. Shedding some light on the otherwise dark world of routing would be a great service. Smart Routing Deep Dive: Quite a few things happen after you hit the trade button in the options market - probably much more than most people realize. Your order has to get routed from your broker/execution platform to the exchange. But it's not a simple path. That's where smart routers come in. What is a smart router? What do they do? What makes them smart? What are the different rules/filters/configurations that most smart routers have to consider? - NBBO, exchange fees, size, exchange pricing model, PIP auctions, payment for order flow rates, etc. What about resting orders? Are the smart routers constantly monitoring them and rerouting if necessary? Why do we need them in the options market? How do options smart routers differ from equity smart routers? Why have smart routers become so controversial in the options market? Spreads: This is the Achilles heel for many "smart" routers since every exchange has its own spread book and they don't talk to each other. So you could easily work a spread order that lines up on one exchange but, because your order was routed to a different spread book, your trade isn't filled. How do we overcome the spread routing issue in 2018? Is it a tech problem or a regulatory problem? Final thoughts/takeaways on smart routers?

The Inbox: Listener questions and comments

• Question from Nikes T: Hey Options Insider! Love the network particularly the tech talk. We need more episodes! On an upcoming show do you think you guys could talk about why dark pools don't exist in the options market? Is it a tech limitation or something else?
• Question from LaLaLad: Does block chain have any practical use on the trading front or is it all just back office stuff?