Entries Tagged 'algorithmic trading' ↓
September 19th, 2012 — The Market Structure Map
An ode to erudition in professional sports, these pearls of wisdom overheard on sidelines come thanks to ESPN’s halftime report during the unfortunate demise of our Denver Broncos in Monday Night Football:
“If you hadn’ta been where you was, and did what you did, we wouldn’ta got what we got.”
“You can sum it up in one word: You never know.”
“You never know” is a good way to describe markets. And reason why market-structure analytics are essential to IR. Paul Rowady at TABB Group, the top market-structure authority today, wrote extraordinary commentary at TABB Forum yesterday saying monetary intervention by central banks poisons market data.
What’s the real price of your stock? As you ponder, Rowady says, “At any moment in time, one could argue that there simply cannot be true price discovery in any market where intervention occurs – which is most of them.”
Why? Because central banks, unlike the rest of us participants, can use unlimited money and unrestrained access to information – the Federal Reserve is not bound by “insider trading” constraints like you – to affect prices of every asset, every commodity, every currency. Continue reading →
July 18th, 2012 — The Market Structure Map
For what struck me as a giant one-day life metaphor, I joined 2,500 other clinically insane individuals Sunday on Colorado’s hallowed cycling Triple Bypass (motto: “For Those Who Dare”).
Coursing from Avon to Evergreen over 123 miles and a triune set of towering climbs totaling more than 11,000 feet of elevation gain, the ride seared lungs and legs, testing the flesh with sweeping escarpments and breath-taking descents. Life’s highs and lows, triumphs and travails, rolled up and thrown aboard a road bike. I’ve crossed it off the list. Whew.
And daily deep in the bowels of Gigabit Ethernet connections, machines are performing triple bypass rides through your stock, feasting on economic data en route.
Taking but one example, the Nasdaq announced – fittingly on Friday the 13th – a machine-readable news service called Event-Driven Analytics. Created by RapiData, a firm the Nasdaq acquired this year, news is formatted so “latency-sensitive” traders can process it with algorithms that decide what and when to buy or sell.
Latency is a trading term that describes the pursuit of seamless and blistering speed. Those sensitive to it are like cyclists in a peloton, wheel to wheel at break-neck pace, who can be harmed by the slightest fluctuation. I saw that happen ahead of me Sunday as we raced over Dillon Dam near the Keystone ski resort at nearly 26mph. One rider made the slightest hesitation and the two trailing him collided and were down skidding over the pavement in a fraction of a second. They were okay but skinned, bloody and bruised. Continue reading →
February 15th, 2012 — The Market Structure Map
At Winter Park Sunday scooting off the Panoramic high-speed chair at 12,060 feet and cooking downslope on skis, the trip was anything but algorithmic.
No, skimming from summit to the lift slow zone was uniquely and individually exhilarating. But in equity markets, unique exhilaration more often comes from derivative bets that randomly pop stocks 7-8%. Otherwise, your shares blend with millions of other securities across asset classes mixed and matched in proprietary recipes aimed at unique outcomes from ordinariness.
Last week, we likened the movie Moneyball, about baseball statistics, to how stocks trade today. Let’s go one step further. Your story is unique. You differentiate your performance from your peers. We as individuals want to be valued on our own merits. So we hope our company’s shares are examined discretely.
Institutional and retail investors want the same thing, right? Distinct success stories, diamonds in the rough. Listening to advertisements from big mutual funds, you get the sense that analysts are rooting in the rice paddies of southeast Asia to learn why fiber optics from the Philippines are the next big opportunity for a German manufacturer of diodes. Or whatever. Continue reading →
January 17th, 2012 — The Market Structure Map
Despite Denver’s rude throttling by the New England Patriots, I am still bound for Boston to panel at the Wednesday NIRI chapter meeting called “A Day in the Life of a Trade: How Can IROs Know What’s Really Happening?” Hope to see you there!
One of our technology geeks shared a link at TED, the place where nerds of a commonly self-aggrandized feather gather to bloviate about culture. In this one, Kevin Slavin, founder of a game-hatching thought shop bought by Zynga, discusses how algorithms run our world. The guy is a good speaker and knows his imagery. Of algorithms, he says: “We’re writing things that we can no longer read.”
Slavin sets up his piquant point this way. He was on a flight with a Hungarian physicist who’s on Wall Street writing algorithms. The Hungarian used to work for the Soviets using math and physics to find American Stealth aircraft. Apparently, technology dissolves the signature of Stealth planes into a million fragments so they won’t look like planes to radar. The Hungarian wrote equations to find electronic tidbits hiding planes. Continue reading →
October 26th, 2011 — The Market Structure Map
Observe. Orient. Decide. Act. OODA.
This is how Pipeline Trading describes its predictive analytics for helping buyside customers identify large-block trading opportunities.
For those of you who missed the news that rocked The Street this week, Pipeline, a dark pool, was fined $1 million by the SEC for misleading clients about the nature of its liquidity.
Were you harmed? Check to see if your shares trade at Pipeli—
Oh. You can’t. It’s a dark pool. You don’t know if your shares trade there unless Pipeline’s orders route to your listing exchange.
Of Pipeline, SEC Enforcement Director Robert Khuzami said in a statement: “Investors are entitled to accurate information as to how their trades are executed.”
Pipeline offers a platform where institutional customers like mutual funds can find “natural liquidity,” or real orders from other buysiders. What’s more, Pipeline provides execution algorithms that mimic how high-frequency traders try to project price and volume in order to place profitable trades ahead of moves. If the buyside can beat HFT at its own game, then instead of being victimized, it can also generate alpha – market-beating returns on trades. Continue reading →