Issue 61

Performance in electronic transactioning

Christopher Lederer
Development Manager @ Flow Traders


Electronic trading is the daily challenge for execution excellence in trading and risk management, utilizing various technologies with the constant strives to improve; always aiming for perfection.

Globalization created global markets that compete for market share, correlations and dependencies between different markets grew as fast as technologies and service agreements could cope with.

We are a leading global technology-enabled liquidity provider, specialized in Exchange Traded Products (ETPs). We are able to grow our organization further, thereby ensuring that our trading desks in Europe, the Americas and Asia provide liquidity across all major exchanges, globally, 24 hours a day. Founded in 2004, we continue to cultivate the entrepreneurial, innovative and team-oriented culture that has been with us since the beginning.

As a principal trading firm, we trade for our own account only. We do not have clients, nor do we provide any investment services or ancillary services to others. Our strategies are designed to use information that is publicly available and we use fairly simple, non-controversial and transparent order types. We are a strong supporter of fair, transparent and orderly markets. 

Performance in electronic trading has various aspects:

Even the most effective and robust strategy or algorithm will not be successful if the latency of the underlying infrastructure isn't clearly above average. This cross- departmental strive for excellence is the key to our performance. Only if all the components are at their best performance, the overall performance is good enough to actively participate in high frequency trading.

Maintainability is certainly another important matter that we have to have an eye on. Once we have achieved the best possible configuration of all components accessing a marketplace, we have to ensure that the performance is maintained throughout the marketplace's lifecycle. Most markets we are operating in have frequent updates to their platforms and API's. After those updates we have to make sure that our performance is at the highest level.

At the same time, we have to constantly ensure we are utilizing the latest technologies available; we have to be able to evaluate possible benefits presented by new developments in hardware or industry wide protocols. Our global network infrastructure needs to have the lowest latency possible. Over the years we have built an extensive network with data centers around the globe, following a 24/5 trading approach from Asia to Europe and on to the Americas. 

As a technology company operating in a financial environment, we use our principal technology platform to quote bid and ask prices in thousands of ETP listings, as well as in other financial products. We also provide liquidity to institutional counter-parties off-exchange across all regions: the Americas, APAC and EMEA. Market participants benefit from higher execution quality and lower overall trading costs, while the markets benefit from greater efficiency and higher transparency. 

Next to a very clear technology driven approach, we heavily invest in continuous education of staff. New technologies and methods have to be evaluated for their potential impact and we need to be on top of those new developments before they are commonly used, finding the right balance again between reliability and speed. However, not all new technologies are reliable and they might also create additional dependencies or needs.

Developers need to constantly stay on top of latest technology; they have to understand what improvements might be offered by new technologies or by new versions of programming languages and protocols. We constantly need to challenge the status quo as our competitors will certainly do the same. 

Electronic trading is a cross-departmental effort where the goal is easily described as "be the fastest"; but to reach the target, everybody needs to have the same expectation and specific knowledge has to be shared with all involved. Any misalignment, any detail not considered might have an impact on performance in production.

Our development teams must be able to react quickly and swiftly to regulations changes. Regulations form an additional layer of complexity because every transaction must be logged/archived, so latency is not the most pressing issue in that process, it is the huge amount of data that has to be processed for reporting, and again, we can't run out of time.

Competition is a driver, and the challenges that we daily face constantly remind us that staying sharp and agile are basic skills to achieve excellence that in return is needed to compete in our environment.

Thus, performance in electronic trading is key to success, but it takes a lot of everything, enormous amounts of talents and vision to compete on the forefront of global electronic trading.



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