The technological arms race between institutional FX firms seeking to gain advantages over other market participants has taken some interesting turns recently.
With regulators in several continents having taken their concerns to government level, as well as companies providing trading infrastructure continuing to invest in highly innovative methods of increasing accessibility and reducing latency, the battle of wits between companies, regulators and technology providers has become a much considered three-pronged subject for industry discussion.
Indeed, whilst certain jurisdictions favor the advancement of the financial landscape, others take an increasingly draconian view, indicating toward the need for innovative means of driving the business forward.
In this week’s Forex Magnates Executive Interview, Janice Robson, President and CEO of Quantica Trading, elaborates on a future of algo trading without boundaries.
Please detail your professional background, and what led you to your senior position at Quantica Trading, and the ethos behind the establishment of the company.
My previous experience in the financial markets is rather broad; from strategy and risk on the trading floor of an ibank to designing and selling quantitative technology solutions to the buy-side – which I’ve done independently, with a start-up, and for one of the largest fintech companies in the world.
This has provided me with a unique perspective of the financial markets and the technological landscape on which it now implicitly relies, which ultimately lead to my current position.
Quantica Trading was officially founded in 2008 to develop an intelligent platform that would give retail users the ability to automate multi-asset, low-latency trading activities globally.
The company then changed direction and focused on providing a more advanced platform to institutional clients. To this end Cloud Trader was born.
Upon assuming your post as CEO, what did you initially seek to achieve, and how did you set about achieving it?
Upon assuming the position of CEO, my key aims were to create an optimally efficient team (with respect to both people, structure and processes), ensure current clients were well served and happy, define the evolutionary path of the product, accelerate the rate at which new clients are on-boarded, and build strategic relationships.
I put a new internal structure in place with, what I saw as, the right people in the right roles, following well thought out and structured processes. I absorbed myself in the product and brought in consultants who had many years’ experience at some of the most famous systematic quantitative and HFT hedge funds in the world to provide insight and direction on the technology, from user experience through to database schema.
Whilst this was going on I met with current clients to understand their perspective and conducted an analysis of the market and our value add. I worked to build up strategic partnerships with data providers, exchanges and other software providers, which we’re very excited about.
The usual vision and values were drawn up and presented to the team and ensured that they all have a solid understanding of – who we are, what we do, who we want to be, who are our clients and why, who are our partners and why. We also have created an internal training program for those without direct market experience to bring them up to speed and provide context to what they’re doing and how very important it is.
Please detail the ethos behind the corporate rebranding, and the separation of the company’s core products.
The recent re-branding brings a name and image that more accurately represents our firm.
“Quantica Trading” speaks to what we do and what we’re about. We are a boutique algorithm development firm with a broker neutral, multi-asset algorithmic trading platform, which enables the rapid development, testing and global deployment of sophisticated algorithmic strategies.
Our flagship platform, Cloud Trader, continues to grow, with continually expanding connectivity, asset coverage, execution suite, and product additions such as the Agent Based Simulation Environment, which takes the algo testing stage to a whole new level.
How do you view the possibilities for developing business within Europe in the future, subsequent to a constant barrage of discourse from the European Commission with regard to algorithmic trading and HFT. Do you think that North America will continue to be home to most proprietary FX trading desks and even attract more market participants from Europe, or do you think that firms will look toward Australia and trade on Singaporean and Hong Kong-based interbank venues?
We receive a lot of interest from Europe but our current focus is North America. If Europe closes its doors on algorithmic trading and HFT, some traders will naturally migrate to alternative exchanges where automated trading is welcome.
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Other traders will seek new opportunities from changing rules and regulations. It’s human nature to always push the boundaries and accept new challenges, this would be no different.
On this basis, please explain the market segment which Quantica Trading’s Cloud Trader aims to fulfil, and how it is positioned, along with which audience uses it.
The core focus of our technology is to simplify and expedite the design and deployment of systematic and quant trading strategies, as well as advanced execution services. We leverage the cloud to act as a relay point between the traders’ user interface and the collocated trading servers.
This creates a fully distributed trading system which aside from reducing our clients IT costs by more the 80%, one of the major benefits of a cloud platform is the ability to effectively access mission-critical systems from different locations. Our current client base encompasses hedge funds, banks, brokerages, commodity trading firms and proprietary trading groups.
Several of our customers have become disenchanted with their existing managed service providers, and are looking to consolidate the number of providers they use. From the discussions we’ve had with clients, it’s becoming so blatantly obvious that they want to be able to do more with fewer vendors.
Talk us through the functionality of the newly released Viper algo-trading system.
The Viper solution enables traders to enter multiple US and Canadian securities (equities and options) into an Excel spreadsheet and execute trades based on various strategies. Viper comes with a collection of pre-built dynamic strategies and provides the user the flexibility to enter and manage large amounts of orders, including single stock and pairs, on a single sheet. This solution supports multiple data sources for quotes.
What factors have contributed to Canada being a jurisdiction of choice for technology firms which provide connectivity and solutions to FX firms, when Canada itself does not have such a developed institutional FX ecosystem compared with the US?
There is a lot of opportunity in Canada for technology firms. Our head office and development lab is located in Waterloo, Ontario, which is considered one of the most innovative cities in the world, plus we have one of the top mathematics and engineering schools in the world right in our backyard!
In the past couple years, the Canadian banks including CIBC and Bank of Montreal have started offering global FX Prime services to their institutional clients. On top of that Canada is home to Oanda, founded by a University of Toronto graduate and now one of the largest retail FX offerings in the world.
Compatriot firm TMX Atrium has expanded connectivity across the world during last year, with points of presence in Paris and London, and dedicated connections to Moscow via Frankfurt. Do you think this is likely to be a white elephant if HFT is outlawed in Europe, or do you think European traders will use such connectivity to access venues in North America and Russia, and even then expand to the Far East?
There is a clear distinction that needs to be made between HFT and automated trading, and the expansion of TMX Atrium across the world will always be valuable for the automated trading world regardless of the HFT consequences put forth by Europe or any other country. Much like individual traders, HFT firms will migrate to environments where their practices are accepted.
What is your stance on the use of dark liqudity among institutional firms as a method of gaining an advantage over those which report their order flow?
Dark pools are a great tool for institutions to get price improvement and anonymity, the exact same way “upstairs trading” was conducted by buyers and seller with brokerages for off exchange trading. In the past year, dark pools increased trade volume by 50% and now constitute for 10 – 15% of the daily volume in the United States.
The issue is very much like the name suggests, many of the specifics around what they are and how they operate is still a bit vague.
What impact does connectivity and quality of cabling, along with distance from venues have on Quantica Trading’s ability to provide traders with an advantageous lead over other market participants regardless of location?
The speed game is a theme of the past. Our firm caters to quants and systematic traders who are looking for flexibility and quick development. The colocation and connectivity portion of our offering is more about the stability and up-time for our clients, as opposed to being the fastest. Getting from idea to execution in the shortest amount of time is the competitive advantage our clients need. Firms are migrating to a Managed Services model driven by cost pressures, renewed focus on core competency, and to remain competitive in areas where they make money….trading.
What is the company’s plan for this year and the immediate future?
We are always looking to improve our platform, either with new features or performance enhancements. The first thing our clients will see in 2014 is that we’ve recently completed an overhaul of the UI. It’s looking very slick, and it’s also super-efficient from a work flow perspective. This will be released in the coming month. One other major part of the offering is back-testing, which was released in beta form late last year.
We now have plans to commercially offer this, grow the asset base and enhance the visualization and reporting functionality which will give our users a more informative experience.
Aside from new features, our firm has been working closely with the Canadian Markets Makers. The Canadian market structure is very different from the US, and the cost of doing business is 4 – 5 times greater, which leaves many of them without the innovative tools they need to remain competitive. One of our mandates is to work with the TMX to ensure they have the cutting edge technology they require to keep up with the low-cost and fast- paced US markets.