The Future of Electronic Equities Trading
The advance of automated algorithmic trading has changed the business largely from a process revolving around intuition predicated on data, to a data-, speed- and machine-driven process.
Marinela Tudoran, managing director of global equities technology at Credit Suisse, shared her insights with Larry Tabb and attendees at a recent breakfast event on running a modern, technology-enabled equities business.
The future of equities trading is faster, smarter, machine-augmented, and more compliant, according to Marinela Tudoran, the managing director of global equities technology at Credit Suisse. Interviewed by yours truly at the InterSystems-sponsored breakfast, “Data, Speed and Trading: Modernizing Capital Markets Infrastructure,” Tudoran talked about topics as far-ranging as growing up in Romania, to being a woman software engineer in Japan, to her 20 years developing cutting-edge trading technologies for Credit Suisse. But mostly we talked about the future of electronic equities trading.
The advance of automated algorithmic trading has changed the business largely from a process revolving around intuition predicated on data, to a data-, speed- and machine-driven process. This was a revolutionary – but widely anticipated – development, as the number of trading venues proliferated and the amount and speed of market data increased almost logarithmically. In today’s market, it is impossible to keep pace with the amount of information being created without the aid of sophisticated technology. Trading today creates daily torrents of data in the range of 15 million to 20 million messages a second. And while the majority of that data is for US options, the data created in the equities market can easily reach 5 million messages per second.
The key to running an equities business is to quickly consume this information, analyze it, and use it to power trading decisions – and to do it quickly. Otherwise, the liquidity you are searching for could be snagged by someone else. To accomplish this, one needs a flexible infrastructure, capable of trading at minimal latencies measured in the high nanoseconds (billionths of a second).
There are many aspects of this business with which the managing director of global equities technology at Credit Suisse needs to be concerned. First, how to capture that information efficiently, effectively, and expeditiously. Second, how to leverage new data management technologies such as in-memory storage. And third, how best to analyze the data once it is captured.
Tudoran recalled an anecdote about how Credit Suisse implemented micro-tactics to transform algo decision-making from a centralized command-and-control structure, in which a central hub guides all execution transactions, to a distributed model that gives semi-autonomous execution engines co-located at the various exchanges increasing control, while the central hub coordinates the overall macro strategy. This enables Credit Suisse’s execution engines to trade faster and keep pace with the market, which was virtually impossible with traditional algos, where exchange data is aggregated, normalized and synthesized at a central hub before a trading decision is made.
While this type of high-speed technology moves too quickly for it to be implemented within a cloud structure, according to Tudoran, she was quick to point out that cloud technologies are becoming an increasingly important aspect of capital markets technology. The ability for the cloud to store, back-test and analyze data is unparalleled and will be a critical aspect of the business, she said. In addition, AI and machine learning technologies will leverage cloud infrastructure and cloud-stored data to help instruct, target, and tune not only trading algorithms but also many core services that are provided by banks and investment managers.
While it’s difficult to predict the future, Tudoran said she believes that a combination of employees and technology will be the winning formula that will dominate the future of trading, banking and investing.
The last, but certainly not least important, aspect of the business we discussed was governance and compliance. Reiterating her belief that technology would help move the industry forward, and that data and analytics were going to be a critical aspect of the business, Tudoran discussed the inevitable and increasingly important role that technology plays in compliance and governance.
The role of governance in our markets is more important than ever. Not only have post-crisis rules changed how products are traded and the amount of transparency in the banking and trading sector, but as the amount of technology has increased and data has proliferated, it has become virtually impossible to manually keep up with the level of compliance, risk, and regulatory reporting needed by the industry. As the capabilities of RegTech expand, more and more firms will employ technology to ensure that they are complying with the vast array of rules and guidelines.
As we enter the new decade and move further away from the global financial crisis, innovation has become an increasingly important aspect of the equities business.. This theme was brilliantly articulated by Marinela Tudoran, the head of global equity trading technology at Credit Suisse, at our breakfast. Along with InterSystems, the event sponsor, and the attendees, I want to thank Marinela and her team at Credit Suisse for enabling her to share her wisdom on data, speed and trading. It was a learning experience for all.
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About the Author
Head of Market Structure Research, Bloomberg
Larry Tabb is the Head of Market Structure Research at Bloomberg. He is a former independent analyst and consultant at Tabb Advisors, focusing on financial markets, fintech, and capital/financial markets issues. He has also served as the founder and research chairman of TABB Group, the research and strategic advisory firm focused exclusively on capital markets and vice president of TowerGroup’s Securities & Investments practice, where he managed research across the capital markets, investment management, retail brokerage and wealth management segments. He has also served as a member of the CFTC Technical Advisory Committee Subcommittee on Automated and High Frequency Trading (HFT) and testified at the Senate Subcommittee on Securities, Insurance and Investment session on “Computerized Trading: What Should the Rules of the Road be?” Larry has been cited extensively in The Wall Street Journal, Financial Times, Associated Press, The New York Times, CNN, Bloomberg, CNBC, Reuters, Dow Jones News, Barron’s, Forbes, Business Week, Financial News, & other major business media.
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