Sunday, January 22, 2012
Thursday, December 23, 2010
Mifid2 to change the rules of the game for Dark Pools and HFT
Full article:
http://tinyurl.com/23uh6k9
Excerpts from the official transcript:
Dark Pools: a "dark pool" is a trading system where the price and volume
of orders or quotes are not displayed before a transaction is executed,
after the trade is executed, or any information about the trade is made
public. Dark pools are subject to most regulatory MiFID requirements at
present, except those concerning pre-trade transparency. Dark pools fall
into two categories. The first is trading venues such as regulated
markets and multilateral trading facilities that use waivers from
pre-trade transparency not to display orders or quotes (for example, in
the case of large trades). The second is other types of facility
operated by brokers, such as crossing systems internally matching orders
that are not subject to pre-trade transparency requirements. The
Commission proposes a number of measures that are relevant to both types
of dark pools. For example, in relation to the first type, the
consultation recognises the validity of waivers, but proposes that there
should be greater clarity and legal certainty as to how and when waivers
apply. It proposes that certain waivers should be subject to further
clarification and, in some cases, restrictions. It also proposes that
ESMA should play a greater role in monitoring this area and ensuring the
consistent use of waivers.
High Frequency Trading ("HFT"): the increased use of automated and high
frequency trading has introduced new risks, including those associated
with rogue algorithms causing undue impact on prices, algorithms
reacting to market events or from the increased pressure on trading
systems trying to cope with large numbers of orders. The main Commission
proposals in this area would require that:
>all entities involved in HFT activities should be authorised and
supervised under MiFID (currently an exemption in the directive allows
some participants not be authorised);
>firms involved in all forms of automated trading should have in place
robust risk controls to reduce the possibility of potential system
errors or rogue algorithms;
>firms that allow other automated traders to use their trading systems
to gain access to a market (for example, by sponsored access) should
have in place adequate risk controls and filters to detect errors or
attempts to misuse the facilities; and
>trading venues should strengthen their risk controls and arrangements
to reduce the risk of crashes or breakdowns in their trading systems,
for example, by having in place appropriate "circuit breakers" to halt
or pause trading in the event of disorderly trading movements or errors
generated by automated trading, and trading venues should be required to
stress test their systems to make sure they are resilient.
http://tinyurl.com/23uh6k9
Excerpts from the official transcript:
Dark Pools: a "dark pool" is a trading system where the price and volume
of orders or quotes are not displayed before a transaction is executed,
after the trade is executed, or any information about the trade is made
public. Dark pools are subject to most regulatory MiFID requirements at
present, except those concerning pre-trade transparency. Dark pools fall
into two categories. The first is trading venues such as regulated
markets and multilateral trading facilities that use waivers from
pre-trade transparency not to display orders or quotes (for example, in
the case of large trades). The second is other types of facility
operated by brokers, such as crossing systems internally matching orders
that are not subject to pre-trade transparency requirements. The
Commission proposes a number of measures that are relevant to both types
of dark pools. For example, in relation to the first type, the
consultation recognises the validity of waivers, but proposes that there
should be greater clarity and legal certainty as to how and when waivers
apply. It proposes that certain waivers should be subject to further
clarification and, in some cases, restrictions. It also proposes that
ESMA should play a greater role in monitoring this area and ensuring the
consistent use of waivers.
High Frequency Trading ("HFT"): the increased use of automated and high
frequency trading has introduced new risks, including those associated
with rogue algorithms causing undue impact on prices, algorithms
reacting to market events or from the increased pressure on trading
systems trying to cope with large numbers of orders. The main Commission
proposals in this area would require that:
>all entities involved in HFT activities should be authorised and
supervised under MiFID (currently an exemption in the directive allows
some participants not be authorised);
>firms involved in all forms of automated trading should have in place
robust risk controls to reduce the possibility of potential system
errors or rogue algorithms;
>firms that allow other automated traders to use their trading systems
to gain access to a market (for example, by sponsored access) should
have in place adequate risk controls and filters to detect errors or
attempts to misuse the facilities; and
>trading venues should strengthen their risk controls and arrangements
to reduce the risk of crashes or breakdowns in their trading systems,
for example, by having in place appropriate "circuit breakers" to halt
or pause trading in the event of disorderly trading movements or errors
generated by automated trading, and trading venues should be required to
stress test their systems to make sure they are resilient.
Monday, November 15, 2010
Monday, September 20, 2010
Wednesday, June 16, 2010
"Error creating window handle"
Nothing related to banking, but something which my users keep complaining about.(Why me? Where are the network admin boys??)As an application developer, one could argue that anything outside the application is not his/her problem. But when we build windows applications, a lot of things help remind us that we don't live in an ideal world.
"Error creating window handle" is one such thing. You can find the nerdy details here http://blogs.msdn.com/b/ntdebugging/archive/2007/01/04/desktop-heap-overview.aspx or simple steps below on how to increase desktop heap size:
- Click on Start - and in search type regedit and press enter.
- Go to HKEY_LOCAL_MACHINE\System\CurrentControlSet\Control\Session Manager\SubSystems\
- Make backup of your key! Click on File menu and choose Export. Give it a name and choose the destination. Click Save and there it is - a backup of your SubSystems reg key. Just in case you want the original key back.
- Doubleclick on Windows key in the right pane.
- In Value data field scroll left or right using arrow keys until you find this:
- SharedSection=1024,3072,512. Change 3072 into 4096 so it reads: SharedSection=1024,4096,512
Wednesday, March 31, 2010
Gold Trading: GOFO vs Lease Rate
The gold carry trade involves borrowing gold at, say 1%, selling the gold, and then investing the cash at, say 3%. If the gold price doesn’t change, you earn a net 2%. The bigger the net difference the more carry trade return you can earn (assuming a stable price) and therefore more attractive short selling of gold should be – as long as there is an expectation that the gold price won’t rise too far to wipe out the profit from the interest rate differential.
The point of a carry trade is, therefore to “capture the difference between the rates” . The question then is what are the two “rates” and what represents the net difference. The booklet titled “A Guide to the London Bullion Market” issued by the London Bullion Market Association clearly says:
“Forward rate (GOFO) = Dollar interest rate – metal lease rate”
Therefore the fact is that it is GOFO which represents the “amount that can be earned from the gold carry trade”. GOFO is the measure of the net difference, “the amount that can be earned from the gold carry trade”, not the Lease Rate.
GOFO is called forward offered rate, because it’s the sale of the forward value of gold, in return for USD.
[inspired from http://goldchat.blogspot.com]
The point of a carry trade is, therefore to “capture the difference between the rates” . The question then is what are the two “rates” and what represents the net difference. The booklet titled “A Guide to the London Bullion Market” issued by the London Bullion Market Association clearly says:
“Forward rate (GOFO) = Dollar interest rate – metal lease rate”
Therefore the fact is that it is GOFO which represents the “amount that can be earned from the gold carry trade”. GOFO is the measure of the net difference, “the amount that can be earned from the gold carry trade”, not the Lease Rate.
GOFO is called forward offered rate, because it’s the sale of the forward value of gold, in return for USD.
[inspired from http://goldchat.blogspot.com]
Sunday, March 07, 2010
Options Algorithms
Options Algorithms are different to Algorithmic Trading of Options(ATO) or Smart Order Routing of Options(SORO). ATO is about using the popular cash world algo strategies like VWAP, TWAP, MOC etc, on options. These slice, dice and schedule an order to avail the most profitable execution price. SORO, on the other hand, has to do with executing the trade with the cheapest transaction cost. The different routing channels to the exchanges, MTFs and dark pool, provide the factiliy to sweep through different liquidity providers, hunting for the most economical way to execute an order. This will, for example, take into account the various exchange based tariff and cancellation rules.
Options algorithms, go beyond both of these, to involve logic that takes into account option sensitivities. The strategies generally consist of rules based on the option greeks -Delta, Gamma and Vega. A few of them are :
Some example ATOs implemented by UBS - http://advancedtrading.com/articles/229402648
1. Options TapNow: Seeks to minimize market impact while intelligently seeking aggressive execution up to a limit price.
2. Options Premium Trigger: Allows you to place an options order that is relative to the price of the option premium, rather than the underlying security.
3. Options Float: Allows you to float your order in the market pegged to the passive side of the spread.
4. Options Hidden: Holds your order off the exchange until your desired price is available.
5. Sweep Display: Aggressively sweeps at the market until the order is filled or no longer available, posting on multiple markets simultaneously.
6. Sweep No Display: Aggressively sweeps at the market until filled or no longer available. Unmarketable orders are held back until the displayed price is in your limit.
7. Sweep IOC: Executes a wave of immediate or cancel orders across multiple markets simultaneously, cancelling any residual unfilled shares.
Options algorithms, go beyond both of these, to involve logic that takes into account option sensitivities. The strategies generally consist of rules based on the option greeks -Delta, Gamma and Vega. A few of them are :
- Volatility Pegged Orders
- Delta Pegged Orders
- Volatility Dispersion Orders( for indices)
- Automated Delta Hedging
- Automated Gamma Hedging
Some example ATOs implemented by UBS - http://advancedtrading.com/articles/229402648
1. Options TapNow: Seeks to minimize market impact while intelligently seeking aggressive execution up to a limit price.
2. Options Premium Trigger: Allows you to place an options order that is relative to the price of the option premium, rather than the underlying security.
3. Options Float: Allows you to float your order in the market pegged to the passive side of the spread.
4. Options Hidden: Holds your order off the exchange until your desired price is available.
5. Sweep Display: Aggressively sweeps at the market until the order is filled or no longer available, posting on multiple markets simultaneously.
6. Sweep No Display: Aggressively sweeps at the market until filled or no longer available. Unmarketable orders are held back until the displayed price is in your limit.
7. Sweep IOC: Executes a wave of immediate or cancel orders across multiple markets simultaneously, cancelling any residual unfilled shares.
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