Trading Tech Talk

Hot Topics in Tech: Top Tech Trends and Developments of 2015

• Blockchain revolutionizing the back office
• HFT is evil again
• HFT not as profitable as originally thought
• Exchanges spending money on tech startups
• Regulators are changing the technology landscape
• The auction tech impact
• Favorite/Craziest Stories of 2015
• Russian hackers stealing press releases from wire services
• The August flash crash
• Russia threatening to use HFT to crash the markets
• NYSE outage
• The leap second
• Twitter trading algos/bots

Things We Do NOT Want to Talk About in 2016

• Spoofing
• HFT is evil
• Dark pool tech
• More possible options exchanges

Hot Topics in Tech: A quick rundown of the Options Alliance Event & Financial
Startup Showcase from Dec 10, 2015. CFTC cracks down on HFT - New rules open to public comment. New study: Robotic trading is killing Wall Street jobs.
Blockchain for banks still at the "gluten" stage.

The Inbox: Listener questions and comments

• Question from JVSchultz - FinTech was all the rage in 2015. What are you top upcoming trends for 2016 in Trading Tech?
• Question from Ntander - You have commented many times on the inability of the current regulators to keep up with the exploding technology in the financial markets. Do you think there is support for a dedicated technology regulator separate from the SEC and CFTC? This body would solely focus on the technology aspects of the markets and leave the regular market regulation to their counterparts. Thoughts?
• Comment from Karrigan - Ever thought of special episodes that focus on different segments of the market. Maybe an Ags Tech episode, a Metals Tech episode, etc.

Hot Topics in Tech: ICE agrees to acquire BGC Trayport for $650 million. NYSE goes from fan to critic of IEX, criticizing "unfair" plan. Derivatives exchanges see use for blockchain technology.
High-speed firms add new perspective to treasury advisory group - KCG Holdings Inc. and Virtu Financial Inc.

The Inbox: Listener questions and comments

• Comment from Aman117 - Ever thought about hosting a cyber security roundtable on the show with exchange, broker and trading firm CTOs? Talk about who is hacking them and what they’re doing to stop it? Could be interesting.
• Question from Amanda F - Looks like budgets for #tradingtech are dwindling with much of that money going toward comp and reg. Any bright spots on the horizon that the tech spend may be increasing or is regulation going to continue to rule the day.
• Question from JVZ16 - What do you think it will take to get stock and options exchanges to adopt the speed bump that you advocated on the last episode? A catastrophic error or failure of an HFT firm that causes massive losses and negative publicity?
• Question from Big Rig - Love the program. You and henry breaking stuff down every month makes my long hauls a little shorter. So thanks for that. I have heard you guys discuss the problem of the lack of new market makers in the biz. Can technology not replace some of that? We have already got robo-advisors. Do you foresee the day of the robo-market makers anytime soon?
• Question from Cookie -What is the best online platform for stock options and futures options?

Hot Topics in Tech: U.S. trader found guilty in landmark "spoofing" case. U.S. regulator signals bid to curb high-speed trading. Exchanges face pressure to disclose high-speed trader perks. CME experiments with real-time margin payments, unveiled a deal with Dwolla. CBOE expands EMS connectivity between traders and workstations. Orc Group merges with CameronTec to jointly foster trading solutions.

The Inbox: Listener questions and comments

• Question from Angelo Myers - Loved the deep dive into FPGAs last episode. I am a hardware wonk. What other hardware developments do you feel have been crucial to the trading landscape? Options or just general financial?
• Question from JimWow -Hello team! Can you please explain what a complex order book is and how it works?
• Question from Bill Williams - Lots of talk about putting a speed bump into the market to stop or slow down HFT jerks. Thoughts? Will it work or will the Cybermen just figure out a way around it?

Hot Topics in Tech: Russian hackers of Dow Jones said to have sought trading tips. High speed trading becomes US election issue. Regulators bring "spoofing" charges against a Chicago firm. UK start-up claims blockchain breakthrough in payment processing. Nasdaq eyes dark-pool surveillance market."Flash Boys" heroes ask for stock exchange status.

The Inbox: Listener questions and comments

• Question from TCity - What is the status of the regulatory proposal to register Algo developers? Do you feel this has a good chance of being passed?
• Question from Tom M., Boca Raton, FL - Can you guys please discuss the net neutrality debate on your program and its possible ramifications in the trading world? Thank you for your excellent program even if much of it goes over my head.
• Question from A. Butler - Hello mark and team. I would like to submit a discussion topic for the trading tech talk program. Can you please discuss the benefits and drawbacks of AWS when it comes to financial services? It seems like AWS has become the backbone of many other industries but does not seem to get much mention in the trading space. Is this simply due to the somewhat slow adoption of cloud infrastructure in the financial markets?

CTO Interview: The guest today is Mike Dunne, CTO at Activ Financial Systems, Inc.

He discusses:

• An overview of your background in the derivatives markets
• What is Activ Financial Systems Inc.?
• Who is their typical end user?
• Scale, Market Data and FPGA
• Going live with Nasdaq Basic.

Hot Topics in Tech: Java at 20 - its 6th major version was released this year. Goggle + Symphony? - Goldman Sachs-backed Symphony raised $100 million in new funding on Monday from search giant Google and others.

The Inbox: Listener questions and comments

• Question from Averyflynn - Tech Team - How about a show about margin tech and margin risk tech? Seems like a hot segment of the industry.

CTO Interview: The guest today is Robert D'Arco, CEO, Rival Systems.

He discusses:

• An overview of your background in the derivatives markets.
• What is Rival Systems?
• Who is the target end-user?
• The Rival Risk Analytics Suite.

Hot Topics in Tech: What’s happening in the world of fin tech?

• Technology groups warned on stricter financial regulation - The chairman of HSBC has said that regulators in China and elsewhere are starting to consider more seriously whether technology companies that provide financial services should, like banks, be regulated more heavily.
• Blockchain initiative called R3 backed by 9 large investment banks - Nine of the largest investment banks, including Goldman Sachs, JPMorgan and Credit Suisse, are planning to develop common standards for blockchain technology in an effort to broaden its use across financial services.
• Bloomberg and Twitter sign data licensing agreement - The long-term data agreement with Twitter will further enhance financially relevant information found on the social media platform for users of the Bloomberg Professional service.

The Inbox: Listener questions and comments

• Question from TomTom08 -Hello TT crew, love the show. Hope you grin back the Lightning Round soon. I would like you guys to comment on OpenFin (https://openfin.co/) and how it can extend the capability of HTML5 for FinTec providers.

Hot Topics in Tech:

• Investors Lose in Today's Markets, Says Former NYSE Head Grasso.
• NYSE Draws Users' Ire with Fee Increases, Patent Charge Proposal.
• Mini flash crash? Trading anomalies on manic Monday hit small investors.
• Algorithmic Trading: The Play-at-Home Version
• International HFT Backlash: China targets high-frequency traders in "spoofing" probe
• Symphony is just the latest attack on Bloomberg's fortress
• 3Red set for "spoofing" legal battle

The Inbox: Listener questions and comments

• Question from GG: Has there ever been talk of some sort of technology glitch or shutdown futures? In the wake of the NYSE problems it seems there would be a fertile market for such a product. Firms could hedge themselves against system risk. Please discuss.
• Question from Cybortrader: when the race to zero winds down to its inevitable conclusion what do you think will be the next big battle ground for HFTs? CPU/GPU cycles? Co-location proximity? Where will the war rage next? Thank you for your thoughts. I very much enjoyed the episode with Thomas Peterfy of interactive brokers.

Hot Topics in Tech: A Massive Selloff. Interesting data and tech insights from the recent pronounced selloff in the market. "Here's the advantage high-frequency trading firms have over everyone else," says Eric Hunsader, founder of Nanex LLC, the U.S. financial markets consultancy. BATS gets regulatory nod for second U.S. options exchange. BATS files client suspension rule to expedite action again HFT spoofers.

The Inbox: Listener questions and comments

• Question from Dariush - Question for trading tech talk radio program. Hello mark. I heard on one of your recent programs that there were system issues preventing OPRA and other platforms from adopting the VIX weekly futures and upcoming options. Do you have any insight into why these specific products would cause issues for technology vendors and platforms? Thank you for your time.

CTO Interview: Today we are joined by Michael Barry, CEO & Founder of EESAT.

He discusses:

• An overview of his background in the markets and how he started EESAT
• Who came up with the idea to put Burt Reynolds on the website?
• Listener question from Leonard Garcia - Can you explain what a complex order book is? Thanks and love the show.
• 35-40% of daily contract volume in non-index is spread- 70% on ISE!
• How does EESAT reconcile the varying functionality of the different order books at the different exchanges?
• Who is the ideal end user of EESAT products?
• How do we solve the problem of spread execution across complex order books?
• Where can listeners go if they want to learn more about EESAT?

Hot Topics in Tech: Ukrainian cyber-criminals hacked newswires to steal company data and raked in millions of dollars.

Hot Topics in Tech: What do you need to know about financial technology?

• A technical glitch postponed the start of trading in futures and options contracts on Eurex by more than two hours, the latest in a run of breakdowns by exchanges.
• Exchanges around the world are avidly wooing high-frequency traders, those controversial speed demons of Wall Street. Despite the often explosive debate over this kind of trading in the U.S., bourses in Mexico, Turkey, South Africa and beyond are trying to lure HFT types to boost business.
• China, perhaps the last big obstacle to high-frequency trading achieving global dominance, where tight government rules, a stamp duty on stock trades and market inefficiency have so far kept out the algobots. High frequency share trading, which favors “predatory strategies that queue jump institutional and retail investors”, is having a toxic effect on Australia financial markets, according to researchers at the Business School.
• NY AG preps case against Credit Suisse dark pool - New York Attorney General Eric Schneiderman is preparing a civil case against Credit Suisse AG (CS).
• CMEs power of electronic trading let it acquire Nymex: The importance of technology was demonstrated again when CME saved Nymex from disappearing.
• A new report by regulators admits that there was an unusual amount of "self-trading" leading up to the October 15 bond market flash crash. The Treasury market, officially, had its own flash crash.

The Inbox: Listener questions and comments

• Question from GG: Has there ever been talk of some sort of technology glitch or shutdown futures? In the wake of the NYSE problems it seems there would be a fertile market for such a product. Firms could hedge themselves against system risk. Please discuss.
• Question from Eli Minn: Good discussion of the NYSE meltdown. I came away from it agreeing that tech actually saved the day. I guess fragmentation is good for something after all.
• Question from TJD: I know you guys were joking when you talked about HFT boats and blimps. But has there been any serious application of drone tech in the trading world? I have seen them used for combat, photography, movie-making, science experiments and more. Why not trading?

Hot Topics in Tech: NYSE glitch: what happened? A Lesson from the NYSE Outage: Fragmentation Works. Leap second was not a mini Y2K, but more of a tempest in a teapot. No major outages or calamities as a result of the leap second. Derivatives market concerned by trade reporting costs. A Bitcoin technology gets NASDAQ test.

The Inbox: Listener questions and comments.

• Question from SemperFi: Do you guys think it was really a hack that brought down NYSE? NYSE, WSJ, United and Reddit? Seems fishy to me.
• Comment from Technation: I very much enjoyed your interview with the CEO of IB. It was a far reaching conversation that covered many topics. It is interesting to see early pioneers in computer trading now pushing back against the modern iteration. I suppose there's a certain amount of karma at work there. I also found his final comment that he supports new startups not by investment but by providing discounts to his own services to be very revealing. I'm already looking forward to your next episode.
• Question from Nikolai: Why do you think so few outside investment funds and venture funds invest in trading-related startups?

CTO Interview Segment
Today's guest is Ben Londergan, Executive Managing Director, Options Trading and Technology at Convergex.He discusses:

• Algos: The growing suite of options algos under development at Convergex including Sweep, Capital Commitment, Buywrite, Delta Neutral and much more.
• Reg SCI: Why is it so important and what impact will it have on the trading technology landscape.
• Floor vs. Tech: Bringing floor-based tech to the upstairs trading crowd. In this world of sub-second executions what value does he see the trading floor bringing to the table?
• And much more.

Hot Topics in Tech

• Mini Y2K - Traders anxious ahead of extra second in day.
• Complex US options market hampers liquidity - report

Lightning Round

• What sector has more billionaires - finance or tech?
• Is the race to zero over?

The Inbox: Listener questions and comments

• Question from Alan Park - Why is open interest not calculated instantly? If I buy 10 puts to close, why is that not automatically reflected in the open interest displayed by the exchanges? Is it not outdated to update such an important metric only once a day?
  
  
• Question from Elly Sanders - We have dark pools in stocks. They do most of the volume on some days. Why do we not have them in options? Will that ever change?

CTO Interview: Mark and Henry are joined by Thomas Peterffy, Founder, CEO and Chairman of Interactive Brokers.

They discuss:

• The HFT Sector
• The impact of the HFT sector on the marketplace
• Thomas' proposal for introducing a random amount of latency into the system
• Robotic typing and the benefit of leveling the playing field
• Mid-day auctions
• Static versus random delays
• Should developers become registered representatives?
• Exchange fragmentation
• Being against HFT vs. being for payment for order flow
• Is there a technological solution to the problems associated with spread books vis a vis market fragmentation?
• The flight of liquidity providers
• The Probability Lab
• Tools for advisors, and what Interactive Brokers is doing for that audience
• The Covestor acquisition

In this episode, Mark and Henry are joined live at the Options Industry Conference by Rob Brogan from FlexTrade.

CTO Interview: Today's guest is Rob Brogan, Vice President of Options Sales at FlexTrade. They discuss:

• What is FlexTrade?
• FlexTrade's work with CBOE
• What's new at FlexTrade?
• Smart routing, algos, and more
• Complex order books

Hot Topics in Tech: The jury weighs in on the guy who stole HFT code from Goldman Sachs. Stealing code. TWTR accidentally releases earnings via Tweet and the speed of information is on display. Hunting down people Tweeting proprietary content.

The Inbox: Listener questions and comments, including cheaper data, a la carte options, and more.

Hot Topics in Tech: Today's guest is Mark Haraburda, Managing Director at Barchart who gives an overview of Chicago FinTech Exchange 2015.

• Overheard @FinTechChicago: "Latency will be a historical market structure discussion." - Let's hope they're right!
• IBM Watson may be a little scary to some participants.
• Cloud is also scary for many firms.
• Plans for the future

Also of discussion today is:

• "Flash Crash" arrest lays bare regulatory lapses at all levels.
• Goldman Sachs makes $20m investment in HFT tech provider.
• Russell become the latest to unveil digital tools for advisors.
• SunGard to explore possible $10 billion sale says sources.

The Inbox: Listener questions and comments

• Question from Charles S. - What software is the most popular these days with proprietary options trading shops? Is there one that dominates the landscape?
• Question from Adam - Hello, I am a big fan, thank you for your great shows. I have been looking for a platform that I use for Backtesting. I currently use thinkorswim but Backtesting is slow and not reliable. Any suggestions? Thanks, AdamVega
• Question from Nikolai - Why do you think so few outside investment funds and venture funds invest in trading-related startups?

Hot Topics in Tech: How did Bloomberg fix its terminal outage? Virtu or vice? Fund managers face dilemma over speed-trading IPO. Parasite turns on parasite: HFT sues other HFTs for "egregious manipulation" of treasury securities. DE Shaw, Citadel urge CFTC to allow anonymous swaps trades.

The Inbox: Listener questions and comments

• Question from Andrew Hale - How about a segment where you guys review trading apps? I would certainly tune into that.
• Comment from Joe Riggs - Love the story about the armada of HFT battleships from the last episode. I have heard some crazy things about HFT over the past year, but this is definitely the craziest. Can you imagine all the big players launching ships to try to claim the waters near the midpoint of the exchanges? My mind keeps going back to the old Barbary pirates - this is the modern day version. I think international fleets would be assembled to disperse this modern day threat to market integrity. Amazing! Sounds like the starting point for a great novel. Trouble is no one would believe it.

CTO Interview: Today's guest is Vlad Karpel, Former CTO of OptionsXpress and Founder of TradeSpoon.

He discusses:

• An overview of his background in the options market.
• TradeSpoon: what is it? What makes it unique?
• The TradeSpoon trade recommendation algorithm.
• Some of the offerings from TradeSpoon, including: Trade Idea Tool, Options Toolbox, Momentum Scanner, Unusual Options Scanner, Size Scanner, Total Value Scanner, and Tradespoon Scoop.

Hot Topics in Tech: Not much love for financial firms in the survey of recent Engineering and CS graduates. Only three financial firms - Goldman, JP Morgan and Morgan Stanley in the top 50. Investment in financial technology groups triples to $12bn in year

The Inbox: Listener questions and comments

An overview of tools for technology analysis for retail customers

Hot Topics in Tech: OCC to consider tech overhaul. Virtu hopes time can heal HFT furor. Study by CFTC official questions legality of HFT practice. City of London "black book" is called for to track "bad apple" traders. Physicist says it is possible to use ships to facilitate high-frequency trading.

The Inbox: Listener questions and comments

• Question from Anthony J. - Hello Mark and Henry. I very much enjoy the program and your insight into this marketplace. I have a question about options data. You have mentioned on other programs an explosion of data and messaging. People always talk about a ceiling for exchanges. But I have to wonder if we are approaching some sort of theoretical limit on how many options series can be listed. Every new issue has hundreds or even thousands of strikes with both calls and puts. That is a tremendous burden for any platform to update in a real time basis with every tick of the stock. At what point do traders simply throw up their hands and say "no mas."
• Comment from Mark Brant - Thanks Henry + Mark for info about "shows", and thank 4 the free flow data on TOI.com and The Top Ten from Trade Alert. Why would the Russians do something so stupid? Their economy is shot already, cyber terror would pulverize it!
• Question from Vargo - The derivatives markets pose a number of significant challenges from a technology standpoint. There has been a tremendous expenditure to create systems to model so many disparate classes and update them with every tick of the underlying. Have we we seen any spillover of this amazing technology to other industries or areas?
• Question from Shadowbox - Is it feasible to use GPS to increase the timing accuracy of data stored by firms and provided to regulators? Or is GPS not fast or accurate enough to meet the new 50ms standard proposed by Finra?

Hot Topics in Tech: Could Russia use high-frequency trading to crash the markets? NYSE rolls out auctions, and upgrades its technology guts. CFTC commissioner attacks swaps regulation and proposes alternative agenda. Watchdogs home in on financial technology. Casualties mount in high-speed trading arms race. Brokers, synchronize your watches - Regulators want the industry to improve their server-clock synchronizations so they can build the Consolidated Audit Trail.;

The Inbox: Listener questions and comments

• Question from Cortez - I like the discussion about Fintech UX on the last show. What would you say is the greatest UX crime committed by Fintech companies?
• Question from Orgo Tea - At what point does the number of listed options exchanges simply become too much of a burden for customers and clients to endure?
• Reply from Mark Brandt (in reply to "Please explain how options block trades are executed and how to transition to block trading from retail work. Thx!") - Thanks for the great answer about block trading, but by "work" I meant my efforts to get block trades, not a job!