Patrick Gardner, Customer Sales and Support
OptionsCity Software, Inc.
200 W. Adams, Suite 1010
Chicago, IL 60606
Office: (312) 635-2719; Mobile: (312) 662-8975
Greater bandwidth and low latency access to the world’s electronic exchanges, along with inexpensive high-speed computing and internet connectivity, are expanding the world of algorithmic high-frequency trading. The media report that more than 70% of all transactions are computer-generated. Average trade size keeps falling and trade frequencies increase. Profit target limit orders may be down to a few ticks. It’s a nuclear arms race of computer hardware and software led by a firestorm of technical trading activity. Such is the endgame of the current generation of sophisticated networked computers applied to the financial markets.
For the small- to medium-size professional trading firm, the question is, “How do we stay up on the electronic trading revolution?” Or, perhaps even more basically, “How to participate at all?” Historically, when computer and information technology advances might at first slow the adoption of new applications and users, infrastructure products would emerge to lower the bar to entry. The world of algorithmic trading is no different, and the team at OptionsCity now offers a set of solutions with their new Freeway product to address the high cost of entry to algorithmic trading. The Freeway product offers key infrastructure for the professional trading firm wishing to participate in the highly competitive world of algorithmic trading. In the end, it’s really all about time-to-market: How quickly (inexpensively) can a trading firm get its trade strategies up and running? That’s exactly what the OptionsCity Freeway product addresses.
The Freeway product offers a two-pronged standards-based solution: First, a desktop environment for developing trade strategy algorithms, and second, an exchange co-location server for strategy execution. As with any technical solution, the devil lies in the details. In this reviewer’s opinion, the Freeway product has made wise design and implementation decisions based on well-recognized internet standards, and then adding the necessary support to address the high-performance demands of today’s algorithmic trading.
The strategy developer makes use of the industry-standard Eclipse Java programming environment (or equivalent) to develop trading algorithms. In this environment, the Freeway product offers a large number of interfaces, or APIs (Application Programming Interfaces), specifically designed for trade development. These mask the details of exchange data, order book, order entry and routing, and position management within a Java framework. This is a programming environment that the professional Internet programmer can work with comfortably.
Freeway adds the notion strategy jobs to modularize development. Jobs are then uploaded to the second major component of the Freeway product — the Freeway server — for test and execution. By supporting multiple asynchronous jobs that the Freeway server executes concurrently, the developer is able to assemble large algorithms a component at a time. The Freeway product comes with a number of pre-written jobs that the trader-developer can use to boot-strap development (plenty of help getting the initial “Hello, World” program up and running). A click on the front-end upload key and a strategy is sent to the Freeway server. The Freeway front-end is used to manage the server and it provides status information and graphical displays of algorithm execution.
The Freeway server, a Linux-based machine co-located within the exchange, handles all the details needed to interface to the exchange and clearinghouse. All the major U.S. exchanges are supported, with plans for a number of foreign exchanges in 2012. Here, the detailed plumbing needed to execute against the exchange is implemented, eliminating time-consuming development, while providing a high-performance run-time environment. The server manages the execution and data flow between strategy jobs, including proprietary queuing mechanisms to handle data bursts during high volume and volatile market activity. The current Freeway server supports round-trip transaction times with the exchange of less than several hundred microseconds.
The OptionsCity team spent more than five years tuning and providing the necessary support for seamless integration with the exchange. Debugging is accomplished with an OptionsCity co-resident exchange emulator, or via a separate OptionsCity server that simulates the exchange. Freeway clients run their code on a dedicated server, and multiple servers can be configured, based on the number of exchanges traded and the scope of the trading. The user either can subscribe to a third-party data service for historical data or capture real-time data for testing. While Freeway server configuration will have a number of variables affecting pricing, a $10,000-per-month figure was quoted by OptionsCity as a representative price point.
This reviewer spent an afternoon testing a CME Market Depth bid-ask queue breakout strategy with the help of an OptionsCity developer. It was impressive to see how readily the pre-canned Freeway APIs and jobs could be used as a starting point and the strategy brought up quickly against the exchange emulator.
It’s all about time-to-market. Using industry-standard Java programming, the Freeway strategy APIs and front-end, and the Freeway server direct exchange interface, the OptionsCity product has solved many of the programming and infrastructure development costs of professional algorithmic trading. Because algorithms run on a co-located Freeway server, development can occur anywhere on the Internet. The professional programming enterprise can look at the Freeway product as a means of cutting development and time-to-market costs. The OptionsCity Freeway product has moved the company from an options focus to cover the breadth of stock, futures and forex markets, as well. If faced with the challenge of entering the business of high-frequency algorithmic trading, this reviewer definitely would examine this product to reduce time-to-market costs.
For 20 years Michael Gutmann was a software engineer and manager at Intel Corporation. He recently published the second edition of “The Very Latest E-Mini Trading: Using Market Anticipation to Trade Electronic Futures, 2nd Edition.” Mike can be reached via www.anticipationtrading.com.