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Algorithmic Trading Solution

Business Problem

Algorithmic trading is transforming the way business is done regardless of asset class, market, or trading strategy. No longer a niche for quantitative traders, algorithmic trading now accounts for over 30% of daily NYSE volume and will represent over 40% of U.S. equities trades by next year according to Aite Group. This phenomenon goes beyond equities and options – for example, algorithmic trading in foreign exchange is expected to double from 12% today to 25% by 2010.

However, implementing an algorithmic trading strategy is tremendously difficult and expensive. Challenges include:

• Market data volumes are doubling every year
• Execution latency makes the difference if an algo is profitable or not
• Standard "black box" algorithms offer no competitive advantage
• Creating proprietary algos requires costly tools, people, and expertise
• Difficult to determine which algos will be profitable
• Market behaviors affect algo profitability

In addition, competitive and regulatory pressures are forcing firms of all sizes on both the buy-side and sell-side to continuously implement, monitor and improve their algorithms and trading strategies. Volatility in the markets only exacerbates the challenge, making the profi tability and risk of models more difficult to predict.

Our Solution

The Truviso Algorithmic Trading Solution provides the fl exibility, usability and scalability needed to implement a successful algorithmic strategy. Based on a break-through data stream processing engine, Truviso allows any market data feed to be analyzed directly using standard SQL, producing continuous algorithm results and instantaneous trade execution. Algorithms can be developed in virtually any language or statistical modeling package, and hundreds of unique algorithms can be run simultaneously in real-time by symbol, currency pair, or other dimensions. In addition, Truviso offers un-paralleled scalability, processing data feeds at rates of hundreds of thousands of quotes per second on a single server with support for clustering.

As a complete algorithmic trading framework, Truviso enables both traders and quants to handle the full algorithm life cycle across any security or trading strategy.

Development – Truviso provides a sophisticated framework for algorithm development. Integrated data capture and powerful data mining tools enable analysis and discovery of trading patterns, trends and signals as the basis for strategies. Pre-defined basic algorithms (e.g. VWAP, TWAP, etc.) can be executed out-of-the-box or used as building blocks for more sophisticated composite algorithms. In addition to SQL-based algorithms, statistical models developed using third-party tools (e.g. MATLAB®, Rlab, QuantLib, etc.) as well as algorithms in various development languages (e.g. C++, Java, .NET, etc.) can be compiled and run against real-time data in Truviso as user-defined functions, stored procedures or other advanced SQL functions.

Testing – Once a new proprietary algorithm has been developed, Truviso provides an integrated environment for back-testing. Using replayed market data over user-specified time periods, modelers can simulate the behavior, performance and efficacy of new trading strategies. With the ability to replay data at accelerated rates, even long-running algorithms can be quickly tested. Multiple algorithms can be compared against each other or against pre-defined benchmarks. After running in back-test mode, algorithms can be moved to a staging environment to test against live data feeds before going live.

Execution – Truviso enables algorithms to go immediately from development into live production. Hundreds of simultaneous algorithms can be computed against incoming data streams with sub-millisecond latency, pushing trade executions to an order management system or directly to an exchange, bank or broker. Integrated visualization allows traders and fund managers to observe the algorithm execution in real-time, both in a chart and table view. Multiple trading signals and/or executions can be consolidated within a single visualization. Configurable inputs allow users to set limits, stops and other thresholds to bound execution. Continuous monitoring and P&L calculations ensure that the algorithm is generating the desired results, and that any unexpected behavior or market anomalies are immediately identified and escalated via alerts or automatic shut-down.

Evaluation – Summarizations of algorithmic-driven executions are consolidated in Truviso, providing an easy method for assessing the effectiveness of various algorithms. Integrated replay allows users to go back to a point in time and "watch" what happened as algorithms triggered trades, with the ability to fast-forward or rewind through time and zoom in on specific time windows. A user can then drill-down into the data and slice it by various dimensions (e.g. by signal, by liquidity provider, by asset, by portfolio, etc.). Continuous scoring of algorithms provides a consolidated view of algorithms rank-ordered by various performance metrics (e.g. P&L, risk, etc.). And integrated charting enables users to see how the performance of individual algorithms is trending over time.

Differentiators

The Truviso Algorithmic Trading Solution offers many advantages over other algorithmic trading platforms on the market – resulting in a differentiated advantage for your firm. Our solution uniquely offers:

• Integrated Solution – Truviso brings together a complete framework for managing the entire cycle of algorithmic trading – from initial development and back-testing to high-performance execution and post-trade evaluation – in a single integrated solution.
• Standards-Based Flexible Modeling – Unlike legacy systems that rely on arcane, proprietary languages for model development, Truviso leverages the widely-known SQL standard, with full extensibility to run user-defined functions, user-defined aggregates, stored procedures, views, sub-queries and other advanced functions.
• Sophisticated Analytics – While traditional systems can only perform basic calculations, Truviso enables arbitrarily complex analytics, including thousands of concurrent queries, integrated OLAP, and execution of third-party statistical models. The output of this analysis provides trading signals that can easily be re-used by multiple algorithms.

All this is performed in an extremely scalable system. A single instance of Truviso can process market data feeds of over 250,000 records/second with sub-millisecond latency. Multiple instances can be clustered together for greater scalability and fault tolerance. Furthermore, thousands of continuous queries, powering potentially hundreds of different algorithms, can be executed simultaneously against incoming market data.

Benefits

• Faster trades through instant analysis and automated execution
• Increased profitability through real-time visibility into algorithm execution
• Continuous evaluation of algorithms, enabling optimal performance
• Proprietary trading strategies that give your firm a competitive advantage
• Faster deployment of new strategies through integrated environment for development, testing and execution
• High-frequency strategies (e.g. arbitrage) through event-triggered trades and millisecond response times
• Improved ability to assume leveraged risk through continuous, real-time risk scoring
• Immediate benefit through pre-packaged algorithms
• Ability to run hundreds of unique algorithms and multiple strategies simultaneously

Capabilities

• Standard SQL queries with extensibility for expressing arbitrarily-complex signals or trading logic
• Pre-defined algorithms (VWAP, TWAP, Kaufman, Bollinger, etc.) which can drive trading strategies directly or be used as building blocks for more sophisticated customized strategies
• Configurable trading logic based on user-defined parameters
• Integrated capture and replay of data for back-testing and model development
• Direct integration to leading financial data providers, including Reuters™, Hotspot™, Flextrade™ and others, as well as standard interfaces, including JDBC/ODBC, FIX, JMS, XML, CSV, etc.
• High-performance trade execution via integration to an order management system or directly to an exchange, bank or broker
• Confi gurable web-based dashboard for monitoring algorithm execution and alerting to potential market anomalies
• Integrated monitoring and drill-down for post-trade analysis, benchmarking, and continuous algorithm improvement
• Extreme scalability – hundreds of thousands of records/second, over thousands of concurrent queries, with latency in milliseconds