www.algotrader.ch

How to Transform Your Businessinto a Fully Automated Trading CompanyAndy Flury (AlgoTrader GmbH)

www.algotrader.ch

Andy Flury

• Enterprise-level Software Systems

• Projects for various major banks and insurance

companies

• Projects for the Swiss Intelligence Agency

• Head of Algorithmic Trading at Linard Capital AG

• Started AlgoTrader Ltd. In 2013

• Masters Industrial Management (ETH Zurich)

• Executive MBA (University St. Gallen)

Founder & CEO AlgoTrader Ltd.

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AlgoTrader Product

• Automation of complex, quantitative trading strategies

• Provides everything a typical trading company needs to run a fully automated operation

Professional Services

• Automation and migration of existing strategies

• Improving and optimizing

existing strategies

• Prototyping and back-testing of

new strategies

• Developing customized

functionality

• Coaching & Training

AlgoTrader Ltd.

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Development & Backtesting

• Complex Excel Sheets

• Macros and/or Visual Basic code

• Combined with MatLab and/or R for back testing

• Historical Data from Bloomberg stored in Files or Database

• Reference Data manually managed

• Spread, Slippage and Commissions?

• No code versioning

Live Trading

• Strategy Logic in C#, Python, Java, etc.

• Hand written interface for historical and live data

• Hand written interface(s) for trading (e.g. Fix or Bloomberg EMSX)

• Hand written reconciliation & P&L calculation

• Manual handling of holidays

• Manual reporting

• Future/Options rolling logic?

Excel, MatLab and Bloomberg

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Benefits / Features

• Same Code for Development / Back Testing and Live Trading

• Interfaces for Historical Data, Live Data and Trading

• Integrated Storage of Market Data

• Integrated Reporting & Reconciliation

• Integrated Monitoring and Valuation

• Integrated Handling of Holidays and Trading Hours

• Automated Hedging

Available Products• AlgoTrader

• Apama

• Deltix

• FlexTrade

• MarketCetera

• MetaTrader

• NinjaTrader

• ProTrader

• QuantHouse

• RightEdge

• Streambase

• TradeStation

Alternative Approach?Integrated Trading Software Solution

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• Design the trading models (in-house)

• Develop the trading models (external)

• Use a 3rd party execution system

Outsourced

• Design the trading models (in-house)

• Develop the trading models (in-house)

• Use a 3rd party execution system

PartiallyOutsourced

• Design the trading models (in-house)

• Develop the trading models (in-house)

• Develop an execution system (in-house)

Required Skills

• Quantitative Knowledge

• Trading Knowledge

• Market Knowledge

• Programming Languages

• Connectivity (API, FIX, etc.)

• Databases

• IT & Hardware

In-houseSolution

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External Development Partner

• Fee Structure

• Required Competence

(Trading and Software Development)

• Intellectual Property

• Service Level Agreement

• Support

• Geographic Presence

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Choosing the Right Broker and Market Data Provider

• Commissions

• Supported Exchanges / Instruments

• API Interfaces (fix, native etc.)

• Redundancy

• Round-trip Latency

• Quality of Data

• Reporting and Reconciliation

• Support

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Decision Drivers

• Number of Market Data Subscriptions

• Number of Orders per Day

• Complexity of Trading Logic

• Specific Latency Requirements

• Hosting Preferences

• IT Knowhow

Hardware and Performance Requirements

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Hardware and Performance Requirements

• Runs once a day

• 0 - 100 subscriptions

• 50 – 1000 trades / day

• Continuously running

• 100 – 1000 subscriptions

• 1k – 10k trades / day

• Continuously running

• 1k – 10k L2 subscriptions

• > 10k trades / day

• In-house or cloud hosted

• Ram: 2 - 4 GB

• CPU: 1 - 2 Cores

• Low network throughput

• Latency: low

millisecond

• In-house or cloud hosted

• Ram: 16 – 32GB

• CPU: 10 – 20 Cores

• Med. network throughput

• Latency: low

millisecond

• Co-located

Ram: > 32GB

• CPU: > 20 Cores

• High network throughput

• Latency: low

microsecond

EOD TradingLow Frequency

Intraday Trading

High Frequency

Trading

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On-Premise

• Privacy

• Security

• Cost

• Flexibility

• Latency

• Availability

Cloud Hosting

• Cost

• Availability

• Scalability

• Flexibility

• Privacy

• Latency

Co-Location

• Latency

• Cost

• Availability

• Flexibility

Hosting

Pro

sC

on

s

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Challenges

• Storage of historical data for

back testing and traceability

• Record historical data

• Purchase historical data

• Historical data providers

Storage Options

• Flat Files / Compressed Files

• Relational Databases

– Size Limitations

• Time Series Databases

– KDB

– OneTick

– Open TSDB

on Apache HBase

Historical Data Management

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Best Practices

• Coding Standards & Development Process

• Test Driven Development (Unit & Integration Tests)

• Make Extensive Use of Logging

• Use a Source Code Management (e.g. Git)

• Deploy New Features in Small Chunks

• Prepare a User Manual and give Training to Users

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Lessons Learned

• Test and production environments must be as similar as possible

• Expect issues with brokers and data providers

• Be prepared to handle all use-cases, especially the unlikely ones

• Proper user training and user manual documentation

• Treat the paper trading phase as real money trading

• Have email alerts in place

• Handle partial fills, limited liquidity, slippage, etc. appropriately

• Expect misunderstandings between traders, quants and developers

• Expect budget overflows

• Expect bugs that only show up in live trading

• Start simple and add complexity only if needed

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Benefits

• Automated – Any quantitative trading strategy can be fully automated

• Customizable – Open-source architecture can be customized for user-specific requirements

• Reliable – Built on the robust architecture and state-of-the-art technology

• Fully-Supported – Guidance available for installation and customization. Onsite and remote training and consulting available

Features

• Multiple broker interfaces and market data providers

• Support for forex, options, futures, stocks, ETFs, Commodities etc.

• Write trading strategies in C#, Python, JavaScript, MatLab or R

• Excel based back test report

• Several built-in execution algorithms

• Support for synthetic instruments and custom derivative spreads

• Options Pricing Engine

• Automated Hedging

AlgoTrader

www.algotrader.ch

THANK YOUFOR YOUR ATTENTION

AlgoTrader GmbH | Aeschstrasse 6 | 8834 Schindellegi | Switzerland

Phone: +41 44 291 14 85Email: info@algotrader.ch

www.algotrader.ch