Download BAML Partners with Thesys on New High-Speed Trading

THE
BAML Partners with Thesys
on New High-Speed Trading Platform
Bank of America Merrill Lynch has rolled out a low-latency market
access and risk control platform developed in partnership with a
high-frequency trading and technology firm. The platform currently
provides access only to U.S. equity exchanges, but the bank is
preparing to extend it to U.S. futures in the coming months and then
European and Asian markets.
A key feature of the platform is that it can process orders and
conduct pre-trade risk checks within 10 microseconds, significantly
faster than what BAML previously could provide. The SEC recently
approved rules that establish new risk management obligations on
brokers when providing access to U.S. securities markets. BAML
officials emphasized that the new platform fully complies with those
requirements while also providing clients with extremely fast access
to markets.
“While we’ve deployed pre-trade risk checks for some time now,
BofAML Express gives our clients an edge by compressing latency
to levels unimaginable just a short time ago without compromising
any controls,” said Michael Lynch, head of Americas execution services. “Since its production debut, we’ve seen rapid client adoption
and increasing volumes demonstrating the continued client demand
for high performance trading platforms.”
The platform was provided by Thesys Technologies, a subsidiary of a trading firm called Tradeworx that developed an expertise
in low-latency automated trading technology for its own trading
strategies. “We felt they had the best handle on the high-frequency
space,” commented John Goeller, a managing director in global
execution services, in an interview with FI. “They understand trading
very well and they have built a very sound platform for real traders.”
The risk controls include checks that apply to each order as it
passes through the system as well as checks that measure aggregate risk in real-time over the course of the trading day. Tim Cox,
a director in global execution services, added that the risk system
tracks filled orders as well as orders resting in an exchange’s order
book, and has the ability to track orders across multiple strategies
and trading venues.
BAML measures the 10-microsecond latency from “wire to
wire”, meaning the time it takes for the Express platform to process
an order message after it hits the broker’s switch in a co-location
center. This does not include the time it takes for the order message
to travel from Express to the exchange, which varies depending on
the exchange and the location of BAML’s servers. Cox noted that
BAML currently has a presence in all the major co-location facilities
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in New Jersey, giving it extremely fast access to all the major U.S.
equity venues.
Initially the platform will apply primarily to clients with their own
automated trading strategies, but this will expand over time. The
bank provides its own suite of algorithmic trading tools to clients,
and Goeller said in “phase two” of the roll-out, these will be integrated into the Express platform.
State Street and Deutsche Börse
Buy Stakes in FX Options Platform
State Street Corp. and Deutsche Börse have acquired minority
stakes in Digital Vega, a London-based vendor of foreign exchange
trading technology. The company operates a multi-bank platform
for trading FX options called Medusa that allows buy-side market participants to broadcast requests for quotes to bank liquidity
providers active on the platform. Deutsche Börse said it entered into
the partnership in recognition of the “changing industry landscape”
in OTC markets. Under the requirements of the Dodd-Frank Act, a
large percentage of trading in FX options is expected to take place
on swap execution facilities.
Traiana Partners with
Banks on FX Risk Management
Traiana, a subsidiary of ICAP, has partnered with four leading prime
brokers in the foreign exchange markets—Citi, Deutsche Bank, J.P.
Morgan and Morgan Stanley—on an initiative to centrally monitor and manage FX trading activity on multilateral trading venues.
Traiana said that by connecting prime brokers and trading venues
in real-time, the service will provide prime brokers with the ability to
monitor and manage risks from algorithmic and high-frequency trading on a real-time basis.
Six FX trading platforms—Bloomberg Tradebook, Currenex,
EBS, FXCM, HotspotFX and Thomson Reuters—are participating in the initiative, which is part of Traiana’s Harmony Creditlink
service. The key feature of the new system is that it will provide
prime brokers with the ability to shut down a client’s trading activity
in a second or less.
“This collaborative industry initiative addresses a fundamental and
immediate industry need—that of providing trading and limit management to prime brokers to enable them to monitor their clients’
credit risk in real-time,” Andrew Coyne, head of FX prime and G-10
eCommerce at Citi, said in a statement. “Initiated independently of
any regulatory call for change, this new solution will fundamentally
change the way the FX industry operates going forward.”
used among Korean brokers, and added that for the brokers, this
linkage is a cost-effective alternative rather than establishing a relationship with a separate broker on each overseas exchange.
TSE to Migrate Futures to
Tdex+ Platform in November
ICE Offers Trading Access
through iPhone and Android Devices
IntercontinentalExchange now supports technology that allows market participants to execute trades on ICE through iPads, iPhones
and Android devices. ICE rolled out the upgrade to its mobile
application in early July as an extension of WebICE, its proprietary
browser-based trading platform. Features include the ability to view,
edit or cancel orders, view real-time reports on gains and losses,
open orders and completed trades, and view full depth of market
display with implied orders and ticker for completed trades. ICE also
plans to offer mobile trading through Blackberry devices in the near
future.
“We’re pleased to offer market participants a secure and convenient way to trade and manage risk across all of our futures and
cleared OTC markets,” David Goone, the exchange’s chief strategic
officer, said in a statement. “As markets become more transparent
and the regulatory landscape changes, ICE continues to create opportunities for our customers with innovative technology solutions.”
MF Global Provides Korean
Brokers with Access to Foreign Futures
MF Global has signed an agreement with Koscom, the financial
technology affiliate of the Korea Exchange, that will provide Korean brokers and their customers with access to foreign futures
exchanges. Under the agreement, which was announced in July,
Koscom will connect its front-end trading platforms to MF Global’s
back-end solutions to provide execution and clearing services for
exchanges around the world.
MF Global is now working with Korean brokers to implement
the linkage, according to Raj Bhambhani, the chief executive officer of MF Global Singapore. Bhambhani, who was involved in the
agreement, said he sees particularly strong interest among Korean
brokers in accessing Singapore Exchange, CME Group, Eurex and
NYSE Liffe. He noted that Koscom’s Powerbase platform is widely
Tokyo Stock Exchange plans to migrate its futures trading to the
Tdex+ trading platform in November, a move that the exchange expects will reduce latency and improve liquidity. The Tdex+ platform,
which is based on the Liffe Connect technology, is currently used for
the trading of options. TSE said the migration will dramatically improve the exchange’s capacity to process trades and reduce latency
to less than 10 milliseconds. The exchange also said it will leverage
the capabilities of the Tdex+ platform to introduce a market-making
facility, inter-commodity spreads and closed auction facilities.
Tradeweb Adds European
Equity Futures to RFQ Platform
Tradeweb, a company that operates electronic venues for dealerto-client trading across several asset classes, has added European
equity futures to the equity derivatives platform it launched in September 2010. The new functionality allows institutional investors to
request quotes from up to five dealers on block-size trades before
the trades are submitted to exchanges for final pricing, clearing and
settlement. There are 12 dealers currently providing liquidity to the
platform across all listed and “flex” futures on all eligible European
exchanges, including Eurex and NYSE Liffe. Tradweb said the new
functionality provides “faster transaction times, better price discovery, and more efficient access to third-party technologies such as
order management systems and derivatives exchanges.” The addition of futures complements the existing equity options offering and
covers index and single stock futures.
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Dutch Trading Facility to Add Equity Options
NGX Expands Physical
Clearing for U.S. Natural Gas
Natural Gas Exchange, a subsidiary of Canada’s TMX Group, is
expanding the number of U.S. locations where it offers physical
clearing of natural gas products. The exchange added two hubs
in July—the Oneok Gas Transportation hub in Oklahoma and the
Tennessee Gas Pipeline’s Zone Zero North hub in north Texas. The
latter compliments the TGP-Z0 South location, where NGX began
physical clearing in April 2011. In February NGX added physical
clearing at two other hubs in Texas--Houston Ship Channel–Houston Pipeline Pool, located east of Houston, and Oasis-Waha Pool, a
broad region in west Texas. NGX now offers physical clearing at 37
U.S. locations, up from 30 at year-end, as well as in Canada.
TOM, also known as The Order Machine, has received approval
from the Netherlands Authority for the Financial Markets to allow its
members to trade derivatives on its trading platform. The company,
which is owned by Optiver, BinckBank and ABN Amro Clearing, said
it expects to begin supporting retail trading in options on European
stocks in the fourth quarter. TOM currently operates a multilateral
trading facility for retail trading in European equities.
Deutsche Börse Adds U.S.
Economic Indicator to Market Data Division
Patsystems Extends Reach
in U.S. with Mixit Purchase
Patsystems will add cash equities and equity options to the range
of products covered by its trading technology through the acquisition of Mixit, a U.S. based developer and vendor of sell-side order
management systems and execution management systems. Mixit
was founded in 2004 and currently has approximately 170 customers, most of which are U.S. financial institutions such as investment
banks, brokers, hedge funds and asset managers.
Deutsche Börse announced on June 27 the acquisition of Kingsbury
International, a U.S-based economic consulting firm known for creating the Chicago Purchasing Managers’ Index. The Chicago PMI is
issued monthly and is widely followed by traders and economists as
an indicator of economic activity. Kingsbury’s partner in developing
the Chicago PMI, the Institute for Supply Management, said the deal
would provide “platform stability” and the potential for a broader
audience.
The indicator will be part of the exchange’s market data and analytics division, which collects and disseminates data on pricing, trading statistics, and approximately 3,400 indices. In 2010 the division
launched its AlphaFlash data and news feed that provides economic
indicators directly to trading firms through the exchange’s highspeed global network. “With this transaction, we are able to offer our
customers direct access to an important U.S. data source,” Holger
Wohlenberg, the division’s managing director, said in a statement.
U.S. Traders Gain Direct Access
to Osaka Securities Exchange
The Osaka Securities Exchange, Japan’s largest derivatives
exchange, can now provide U.S. market participants with direct
access to its newly implemented J-Gate trading system without having to register as a U.S. futures exchange, following the issuance of
a no-action letter by the Commodity Futures Trading Commission
on June 1. The no-action relief covers five broad-based stock index
contracts that have already been approved by the CFTC, including
the Nikkei 225 futures contract.
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NYSE Liffe Offers Direct Access in Brazil
NYSE Liffe announced on July 25 that it has received regulatory
approval from Comissão de Valores Mobiliários, Brazil’s markets
regulator, to offer direct electronic access to its London market.
CVM granted a similar approval to ICE Futures Europe in March.