EquaMetrics claims to eliminate coding from algo trading with launch of RIZM

EquaMetrics claims to eliminate coding from algo trading with launch of RIZM

http://www.automatedtrader.net/news/at/142908/equametrics-claims-to-eliminate-coding-from-algo-trading-with–launch-of-rizm

Cloud-based platform with intuitive algobuilder claims to reduce complexity and cost of algo trading for individual traders

New York – EquaMetrics has launched RIZM, a visual programming tool which it says can enable traders who have no prior knowledge of programming, coding or high-level mathematics, to build, to test and deploy complex algo trading strategies. EquaMetrics has spent the past two years developing RIZM and has raised $3.25 million from private angel investors to date.

Offered on a monthly subscription basis RIZM will initially support equities, futures and FX trading, with live trading connections to Interactive Brokers and Forex Capital Markets (FXCM). EquaMetrics plans to add options and fixed income trading, along with live connections to all mainstream retail and institutional brokers.

“We are putting powerful institutional tools into mainstream traders’ hands with the launch of RIZM,” said Amr Mohamed, EquaMetrics’ CIO. “Algorithmic trading has long been the domain of only large companies that have the resources for software engineers to build and execute on every trading strategy. We created RIZM to provide an intuitive, easy-to-use interface that will provide anyone – active professional as well as non-professional traders – access to a cloud-based platform for building, back testing, simulating and executing algorithmic trading strategies. I have no doubt that within two years’ time, every trader will be running automated trading strategies.”

FIA & FOA MERGER ON THE CARDS ???

http://www.thetradenews.com/news/Asset_Classes/Derivatives/Cross-border_issues_prompt_derivatives_association_merger.aspx.

Asset Manager PEAK6 Selects SunGard for a comprehensive Portfolio Management and risk system

Asset Manager PEAK6 Selects SunGard for a comprehensive Portfolio Management and risk system

http://www.derivsource.com/articles/asset-manager-peak6-selects-sungard-comprehensive-portfolio-management-and-risk-system

PEAK6 Advisors LLC (“PEAK6”), a Chicago-based asset manager specializing in alternative investments, has gone live with SunGard’s Front Arena and Monis solutions. The solutions help PEAK6 better service its clients by providing customized portfolio and risk management, valuations and trade processing.

SunGard’s Front Arena and Monis help increase operational efficiency by allowing PEAK6 to concentrate on what they do best – delivering returns and achieving agile growth.

“We wanted to ensure we are conducting ongoing due diligence by offering our investors a well-defined investment management system that can handle our assets under management in an efficient way. SunGard’s Front Arena and Monis help mitigate our internal risk and automate our validation processes – giving our investors piece of mind.” – Scott Kramer, chief technology officer, PEAK6

The implementation was completed in less than four months and PEAK6’s requirements were met in terms of open architecture and highly configurable functionalities.

The Securities Market Coalition discussions and slides – House Ways and Means Financial Product Discussion Draft

The Camp Proposal
Ed Tilly – CBOE
Recently, you may have read news accounts of the U.S. House Ways and Means Committee’s draft proposal (under the leadership of Committee Chairman Dave Camp – R-MI) to overhaul the entire tax code. The proposal is now included in President Obama’s 2014 budget.

The draft proposal addresses what we realize is a difficult and complex task of crafting comprehensive tax reform, but, as currently drafted, would radically revise the taxation of listed options. If the proposal becomes law in its current form, it would make the use of listed options much less attractive and would have devastating effects on the options industry and the customers it serves. The proposal also includes a repeal of the 60/40 tax treatment, which we have long opposed.

The Securities Market Coalition (made up of all U.S. options exchanges and the OCC) is working to inform Members of Congress about the implications of the draft. Our educational efforts focus on what we believe are unintended consequences of the draft proposal.

Below is a link to the House Ways and Means Financial Product Discussion Draft, which details the proposed tax changes. Also linked are two handouts from the Securities Market Coalition: one that addresses several key provisions in the Chairman’s discussion draft proposal and a second that outlines implications of the proposal. I encourage you to read them to determine the implications for you and your business.

House Ways and Means Financial Products Discussion Draft: jlne.ws/175qwL4 (pdf)

US Securities Markets Coalition Congressional Hand Out: jlne.ws/11gE588 (pdf)

Real-World Examples, Implications on Options: jlne.ws/ZzGxDy (PowerPoint)

CFTC’s Chilton calls for derivatives ‘bill of rights’, including HFT registration and conduct rules

http://www.automatedtrader.net/headlines/142432/cftcs-chilton-calls-for-derivatives-bill-of-rights–including–hft-registration-and-conduct-rules

First Published Wednesday, 3rd April 2013 from Automated Trader : Automated Trading News

Bart Chilton set out his view of what rights swaps and futures end users should have as many of them begin to come under CFTC scrutiny for the first time.

Washington DC – Commissioner Bart Chilton of the Commodity Futures Trading Commission (CFTC) has suggested a “bill of rights” for end users in the derivatives markets, including a call for high frequency trading firm registration and conduct rules.

“At the dawn of the United States of America, the founding fathers set out 10 principles, the “Bill of Rights” that would bind the new national democratic government,” Chilton said in a statement. “Similarly, today I am setting out 10 principles to guide the Commission as we move into a new, more transparent Dodd-Frank regulatory regime.”

Chilton noted the approaching April 10 date for compliance for Dodd-Frank swap reporting rules for end-users, saying that many of them would now find themselves under CFTC regulation for the first time.

“I believe these principles best protect our consumers and end-users who help move our economy forward-and let’s keep in mind that these end-users were not the cause of the financial crisis that lead to financial reform. In fact, end-users were among the many victims of the crisis and much of Dodd-Frank was drafted with their interests in mind,” Chilton said.

Below are the “rights” Chilton set out:

1. Right to reasonable Dodd-Frank implementation. “Dodd-Frank needs to be implemented and needs to be implemented quickly, but that does not mean it should be done so harshly,” he said,

2. Right to legal certainty. “End-users and other market participants should have little doubt as to the status of their activities and the Commission and staff should respond thoughtfully and diligently to requests for legal certainty.” He said he would not support an action against an end-user, exchange, or anyone else on an issue deserving clarity that is the subject of an outstanding request for interpretive guidance.

3. Right to compete in the markets. “To protect end-users’ right to compete in the markets, the Commission should start with two common sense rulemakings: First, we need high-frequency trader registration and conduct rules to prevent cheetahs from going feral. We should also provide the public market quality metrics designed to help end-users and other non-cheetahs from distinguishing between false cheetah liquidity and true liquidity.” (Chilton often refers to high frequency traders as “cheetahs” due to their speed.) “Second, we need caps on speculation so that the commodity markets return to their principal role as risk management markets for end-users. The commodity markets worked best when end-users were the predominant players. The Commission should move quickly on a new proposal on speculation limits by May 1.”

4. Right to safe accounts. “We need strong rules and rigourous auditing to ensure that futures commission merchants (FCMs) don’t abuse their role as intermediaries while not imposing undue burdens on FCMs that provide end-users access to critical risk management markets (including a sensible compromise on residual interest).”

5. Right to have confidence in the commodity markets. End-users should be confident that their intermediaries, FCMs and SDs in particular, are appropriately regulated and supervised, Chilton said, noting that he has called for raising civil monetary penalty maximums to $10 million for entities and $1 million for individuals. “The current $140,000 maximum civil monetary penalty is simply an inadequate deterrence for an agency tasked with, among other things, deterring manipulation and preventing systemic risk.”

6. Right to clear (or not to clear). Central hedging units for non-financial end-users should be free to clear or not to clear on transactions that mitigate commercial risks for their corporate group, Chilton said.

7. Right to margin flexibility and reasonable capital rules. Under-collateralisation has not been an end-user problem, he said. “The Commission also needs to come up with a sensible compromise on capital requirements for non-financial SDs.”

8. Right to hedge. “Speculative position limits should encourage and not unduly complicate prudent commercial risk management practices. Public power end-users using swaps to hedge commercial risk should have the same access to risk management markets as privately-owned utilities.”

9. Right to smart regulation. “The Commission owes the end-user community a commitment that it will amend its rules when these smarter ways become apparent,” Chilton said.

10. Right to be heard. “Many end-users … are not used to having their swaps activity subject to CFTC regulation. During and after Dodd-Frank implementation we need a venue for end-users to air their concerns.”

What the ICE/NYSE Merger Means for the Industry courtesy of the TABB Group

With each passing day, the acquisition of NYSE Euronext by ICE seems more likely to receive final approval. Here are 5 ways the deal will impact the capital markets.

February 15, 2013, marked the end of the Hart-Scott-Rodino Act waiting period in the acquisition of NYSE Euronext by IntercontinentalExchange(ICE). With each passing day, the acquisition seems more likely to receive final approval. As we await the next phase of regulatory approval from the SEC, we wanted to share a few thoughts on how we believe the acquisition will impact current clearing, reporting and trading operations, as well as how the two exchanges can benefit from the merger.

1. Need for Physical Trading Floor

The future format of the NYSE trading floor seems to be on the minds of everyone. There are analyst speculations that ICE’s CEO, Jeffrey Sprecher, will close the trading floor, as was done to the New York Board of Trade in 2012 four years after it was acquired by ICE. However, according to interviews, Sprecher has expressed intentions to keep the physical trading floor intact.

[Related: “It May Be ‘Bye-Bye to the Big Board,’ But the NY Times Should Get Its Story Right”]

Both companies have robust electronic trading, and Sprecher has acknowledged the value of NYSE’s legacy in voice brokering. As technology continues to dominate the exchange space, there has been recognition of the value of voice brokering (by which the NYSE is defined). The market has ironically become too complex to rely only on computer-to-computer trading, showing the physical trading floor still provides an intrinsic value in keeping an orderly marketplace.

2. Impact on Clearing

US-based firms that are major players in the derivative space will benefit by having a local trading and clearing venue, through reductions in clearing costs and operational risks. Typically, coordinating multiple back-office processes and reconciliations between the US and UK calls for duplicate efforts, resulting in back-to-back bookings to flatten balance sheets and delays in handling breaks; having the ability to manage these operational processes will make for a more efficient process.

Title VII of the Dodd Frank Act, which requires central clearing for certain derivatives contracts, has limited NYSE’s presence in the US-based interest rate swaps clearing business. Currently, the NYSE has a small presence in the US-based interest rate swap clearing business, due to a lack of access to a central clearinghouse, now mandated by the Dodd-Frank Act. Through the acquisition, NYSE will be able to benefit from ICE’s presence in European fixed income derivative trading and clearing.

3. Impact on Market Participants

Reductions in clearing costs can translate into cost savings for market participants. Just last year, ICE had to increase its trading and clearing fee due to “regulatory burdens,” and with the merger of NYSE Euronext, ICE will also have to compete with other exchanges on transaction costs. Even if fees increase after the merger, market participants would still fare better than if the two companies operated independently. This newly merged exchange will be able to offer a larger array of products and services, so that market participants can look to fewer companies for trading execution and clearing services, thereby decreasing expenses associated with initial client on-boarding.

4. Impact on Reporting

NYSE’s core data products make U.S. market data free and available, using consolidated tapes, giving transparency to last-sales price and quotes. It also sells its non-core data products to analytics traders, researchers and academics. ICE will be able to leverage NYSE’s experience in data reporting, as it looks to setup its own swap data repository (SDR), in order to meet CFTC mandates for real time swap reporting.

[Related: “Commissioner O’Malia Talks Derivatives Reform: Assessing and Improving the Change”]

ICE has already set up a registered SDR — and the ICE Trade Vault, which will offer both recordkeeping and reporting services for credit default swaps. However, as reporting requirements go live for additional asset classes, it will be necessary to offer data recordkeeping and reporting services to these as well. This is where NYSE’s existing core data products can benefit ICE.

5. Benefits in Merging of Exchanges

Although ICE and NYSE’s product offerings differ vastly, the functions of trading, clearing and settlement demands often overlap, and both are registered with the CFTC as designated contract markets. Efficiencies can be gained when these two exchanges tackle the requirements in swaps reporting and recordkeeping, external business conduct rules and documentation standards in this era of heightened standards for SIFI. As regulatory mandates increase the operating costs for exchanges, it is becoming prudent to explore additional mergers.

Options Exchange Marketshare – March 2013 (from the Options Clearing Corporation)

Options Exchange Marketshare – March 2013 (from the Options Clearing Corporation)

March 2013 Total Options Marketshare:
AMEX- 13.37%
BATS- 3.76%
BOX- 2.06%
CBOE- 25.93%
C2- 1.86%
ISE- 15.19%
MIAX- 0.18%
NOBO- 0.86%
NSDQ- 8.13%
NYSE Arca- 10.81%
OMX PHLX- 17.86%

March 2012 Total Options Marketshare:
AMEX- 13.95%
BATS- 2.43%
BOX- 3.72%
CBOE- 27.04%
C2- 1.31%
ISE- 15.66%
NSDQ- 4.96%
NYSE Arca- 10.15%
OMX PHLX- 20.78%

March 2013 Equity Options Marketshare:
AMEX- 14.89%
BATS- 4.20%
BOX- 2.30%
CBOE- 17.83%
C2- 2.07%
ISE- 16.67%
MIAX- 0.20%
NOBO- 0.96%
NSDQ- 9.07%
NYSE Arca- 11.99%
OMX PHLX- 19.83%

March 2012 Equity Options Marketshare:
AMEX- 15.02%
BATS- 2.63%
BOX- 4.02%
CBOE- 21.55%
C2- 1.36%
ISE- 16.83%
NSDQ- 5.36%
NYSE Arca- 10.94%
OMX PHLX- 22.29

Like BATS, NYSE EuroNext launches Mini-Options

NYSE Euronext launches mini options

http://www.automatedtrader.net/news/exchange-news/142351/nyse-euronext-launches-mini-options

First Published Tuesday, 19th March 2013 from Automated Trader : Exchange News

Like the words from the song, “…anything you can do I can do better, no you can’t, yes I can, no you can’t, yes I can…”, well like BATS’ launch, Mini options are available on NYSE Arca and NYSE Amex for Amazon, Apple, Google, SPDR Gold Trust and S&P 500 Index ETF

New York – NYSE Euronext has launched mini options contracts on NYSE Arca and NYSE Amex, its U.S. options exchanges, in five actively traded securities and exchange-traded funds.

NYSE Arca and NYSE Amex options customers will be able to trade mini options with 10 share deliverables as opposed to the standard 100 deliverable contracts. Mini options will be available in Amazon Inc. (AMZN), Apple Inc. (AAPL), Google Inc. (GOOG), SPDR Gold Trust (GLD), and the S&P 500 Index ETF (SPY) effective March 18.

Mini options were designed to meet the growing demand by investors desiring exposure to options on higher priced equity and ETF products, but with less capital at risk than would be required for standard options contracts on those securities.

Key characteristics of Mini options contracts:

• Minis are available on five underlyings: AAPL, AMZN, GLD, GOOG and SPY and will trade under symbols AAPL7, AMZN7, GLD7, GOOG7, and SPY7;
• Minis have a 10 share deliverable vs. a standard contract has an underlying of 100 shares;
• Minis will trade at similar strike prices as standard contracts.

“Minis will enable investors, large and small, to execute options trading strategies without making high capital investments,” Steve Crutchfield, head of NYSE Euronext U.S. Options Exchanges commented. “We are proud of the momentum and of our continued efforts to provide our customers with alternatives that meet their individual trading needs while offering greater choice, access and flexibility.”

List of TMX ATRIUM TRADING VENUES

TMX Atrium has a wide range of customers including venues, buy side, brokers, clearers, ISVs, market data vendors.

TMX Atrium covers a wide range of the financial community.

Venue City Country
Alpha Trading Toronto Canada
BATS Europe London UK
BATS US Weehwken USA
BME Madrid Spain
BOX Secaucus USA
CBOE Secaucus. USA
CNSX Toronto Canada
Borse de Luxembourg Luxembourg Luxembourg
Burgundy. Stockholm Sweden
CHI-X Canada Toronto Canada
CHI-X Europe Slough UK
CME Chicago USA
Deutsche Boerse Frankfurt Germany
Direct Edge Secaucus USA
Equiduct London UK
FX All Weehwken USA
FXCM Bergen USA
HotSpot Jersey City USA
International Sec Exchange New York USA
LMAX London UK
London Metal Exchange London UK
Match Now Toronto Canada
Montreal Exchange Toronto Canada
Moscow Exchange Moscow Russia
NASDAQ OMX (Nordic) Stockholm Sweden
NASDAQ OMX (US) Carteret USA
Oslo Bors London UK
Nordic Growth Markets Stockholm Sweden
NYSE Euronext (Europe) Basildon UK
NYSE Euronext (US) Mahwah USA
Omega ATS Toronto Canada
Pure Trading Toronto Canada
Sigma-X London UK
TOM Stockholm Sweden
TRAD-X London UK
TSX Toronto Canada
Warsaw Stock Exchange Warsaw Poland

Futurised Swaps – Video of the CME and LCH Point of View at the CFTC Roundtable

Futurised Swaps – Video of the CME and LCH Point of View at the CFTC Roundtable
The CFTC had a large meeting to discuss futurised OTC products, below is a 15 minute extract of the full 6 hours where Kim Taylor (President of their Clearing Business) and Dan Maguire (President of Yorkshire, and a Senior in SwapClear US), speak about the topic.

Key points from Kim

Capital was insufficient to cover market losses in the crisis, leading to a spiral of margin calls and a bail out, Dodd Frank is the US approach to solving this problem
The DFA is one solution, to redesign the OTC market, and enhanced use of Futures is also a legitimate approach to the same goals
There are 40-50 ‘line items’ for Deliverable Swap Futures, meaning 40-50 distinct products
There were 60,000 ‘line items’ for Lehman in SwapClear. BH: I don’t count each slight permutation of an IRS as a distinct “product”, so an IRS based on ACT/360 isn’t so different from a swap based on ACT/365, in my opinion
The diverse set of line items in the OTC market prevents liquidity formation. BH: I disagree, true liquidity can be measured from market activity by looking inside MarkitWire / SwapClear, and then into the CME Deliverable Swap Future stats.
Compare turnover of trades to open positions, in futures the market rotates 25 times per year, in OTCs about 2.5 times (no background data provided)
There are an estimated 5m participants in the futures market, compared to 30,000 in the OTC market.
BH comments:
But do those 5m all trade deliverable swap futures? And would they step up to take the other side of a DSF when CME were trying to sell off a defaulters portfolio?
The SwapClear model mandates that surviving members must participate in the auction process, of which there are now around 70 corporate groups representing a large proportion of the whole swap market.
Are traders in DSFs obliged to participate in a liquidation situation?
The reduced number of line items means trade netting is an order of magnitude better in futures than OTC
BH: Both CME and SwapClear provide trade netting of OTC IRS in their CCPs, it’s relatively easy, although not intrinsic to the IRS product the way a future contract is
Methods of liquidation in Deliverable Swap Futures
Open market sale
Private negotiated sale
Competitive auction
For an OTC default CME only use a competitive auction, due to the different profile of an IRS portfolio
An FCM must post the minimum CCP margin, but can collect more if they wish
Key points from Dan

SwapClear contains 60-70% of the global OTC IR swap market
SwapClear has cleared $19trn of the $20trn buy-side Swaps anywhere in the world (i.e. other CCPs have only captured $1trn of buy-side business)
SwapClear clears $2trn notional per day, higher than implied by Kim perhaps
Also torn up $170trn of IRS (I assume he means in partnership with TriOptima / TriReduce)
Workflow for OTC is now more standardised, the flow from execution to clearing is much smoother
OTC products hedge non-standard risks – the raison d’être of the market
The portfolio at SwapClear when Lehman defaulted was 66,000 IRS in 5 currencies, $9trn of notional, maximum maturity of 30 years
30% to 40% of Lehman’s IM was used during the Default Management Process, the remainder returned to the estate of Lehman / their administrators
No-one in SwapClear lost a penny as a result (is that a US cent or an English 1p?)
Rate risk can be transferred and transformed, but doesn’t “disappear” so transmuting OTC Swaps into Futures will just move the problem, not solve it
Why would a $10m DV01 in exposure attract a 2 day VaR holding period on an Exchange, and the same risk as an OTC cleared product attract a 5 day holding period?
The key is: do you have access to liquidity in a default?
Shouldn’t the holding period in any market be derived from the liquidity [and other key issues in a default], rather than by top down regulatory mandate?
I cut Dan off slighty short on the video, sorry Dan.

My key points

You can download a spreadsheet of volumes of DSFs here: http://www.cmegroup.com/trading/interest-rates/dsf-volume-and-oi-tracker.html
More work needs to be done to relate the holding period on a VaR calculation back to the participants in the market, and conditions in a default.
Likewise the legal basis which obliges (or doesn’t) oblige folks to take a defaulters positions need examination
The point about DV01 above is worth more examination
Source videos, 6 hours long: http://www.cftc.gov/PressRoom/Events/opaevent_cftcstaff013113