Back in January, Forex Magnates reported that Danish financial technology firm TickCOM, was planning on entering the retail market with the launch of automated trading products. Following on that report, the firm is currently launching its iSTRAT automated trading product to the market. Similar to products like Tradency and Currensee, iSTRAT provides an array of diverse strategies which users can elect to copy and have executed automatically in their accounts. Differing from those products, as well as social trading offerings, iSTRAT strategies are proprietary models created within TickCOM’s quant engine. Generating 1000’s of strategies, users are provided the current top 100 algorithms of each symbol for them to choose.
Soren Lanng, TickCOM CEO explained to Forex Magnates that, “There are many similarities between Copy Trading / Social Trading and the iSTRAT product type.” As he described that, “Traders select among promising historical performance, equity curves in both cases.” He added though that the “Main difference is, that the user with iSTRAT has influence of which kind of strategies he is subscribing to, he can for example use “Bear/Bull” to get bullish or bearish strategies, if the trader knows the market is directional in these days, or the trader wants to explore a market event – selecting a trade leader, the trader has no influence on how the trader leader is going to trade today or tomorrow.”
Lanng added that the firm doesn’t view themselves as a signal provider or strategy creator, as the product gives users the ability to choose and remove strategies within their portfolio. According to Lanng, putting the power in the hands of the traders to manipulate the TickCOM quant engine as they please, the product doesn’t fall under the category of money management offerings that may require regulatory licenses in the future within the EU. TickCOM believes that this is one of the product’s more important features for brokers.
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The product is currently being offered to brokers as a standalone platform that can connect to their platforms. In addition, an iframe version is available to be integrated within a firm’s platform.
A Black Box Future?
One of the main questions about iSTRAT and similar types of product adoption are whether users are interested in black box strategies? With these black box products, users are provided performance data which they can use to determine which strategies fit best with different markets. However, the technical specifics of the algorithm remain hidden from users. On one hand, this is no different from the experience of buyers of distributed EAs or PAMM accounts. With those products though, there is generally some sort of description of company facing representative to provide more information. With black boxes, traders are at the mercy of the algorithms and performances. In addition, products such as iSTRAT require traders to become more active in managing their portfolios. While this isn’t necessarily a bad thing, it does differ from the majority of autotrading products which aim to be as simple and hands off as possible for traders.
Having demoed the product, my personal opinion is that the procedures to select strategies and manage a black box algorithmic portfolio will be found too cumbersome for the majority of retail users. This could change in time as the user interface to meet the needs of beginner traders evolves. However, where the product could find popularity is with the people it is supposed to replace. Money managers may find that having access to TickCOM’s algorithmic strategy library is a compelling offering. Specifically, TickCOM is marketing that iSTRAT’s portfolios are expected to be heavy volume generators, which is an appealing product for managers that have a rebate component in their compensation.