Apr 24 2014
The PR bluster around the new Michael Lewis book ‘Flash Boys’ is deliberately confusing, yet almost no-one seems to have read it. With the FBI investigating high-frequency trading (HFT), the issues that the book raises are clearly very serious. This is what you need to know.
1) HFT strategy is under the spotlight, specifically latency arbitrage. What is it?
Latency arbitrage takes advantage of the delay that other traders face in sending and receiving data and orders. An HFT firm using latency arbitrage gets data faster than other traders so it can tell what is being bought and sold at what price ahead of other traders. Secondly it trades faster than them – many thousands of times faster in some cases – so if you had to get to 30 different markets in order to buy 1,500,000 IBM shares, it would know you were trying to buy those shares, buy them ahead of you and raise the price by a fraction, say 0.5 cents.
2) Is this a US only problem?
The US model requires trades to be routed across all exchanges to find the best price, under Regulation NMS (Reg NMS). As an order is routed from one venue to another in a consistent route, at a consistent speed across a given network, from any given broker, arbitrageurs have a known window of opportunity to intercept a trade. Any market in which many trading venues exist could support the same model.
3) Why are brokers and infrastructure providers under attack?
They have all offered facilities that have supported latency arbitrageurs in their attempts to take money from the trades of fund managers. The book alleges that brokers have provided high-speed connections for their clients to move between markets faster than the brokers’ other clients. Trading venues have all offered ways for latency arbitrageurs (and other HFT firms) to get market data faster than other traders. The book notes that the cost of this high-speed data connection (US$10,000+ per month) requires an economic model that produces profit beyond the reach of a typical retail investor. The current round of investigations by US authorities is focussed on the similarity between sending data to one person faster than another, and giving data to one person before another. The latter is illegal. The New York Stock Exchange was fined US$5 million in 2012 on the basis that they are the same thing.
4) How do brokers win from HFT?
The book estimates that brokers take 15% of what HFT firms make, but also by routing order to lots of venues (brokers own 44 out of 45 alternative venues in the US, according to Ronan Ryan, chief strategy officer of exchange IEX) they avoid having to pay the main exchanges fees, capture order data themselves (which is very valuable) and do not lose control of liquidity. In the 2000s, brokers began to hold on to liquidity as much as possible, as the ongoing market fragmentation made execution harder to achieve.
5) The book is very much in favour of IEX; why?
IEX is an exchange based on the principal of confounding HFT strategies, simply by routing orders to other venues so that they all arrive at the same time, preventing any gaming. It has enjoyed enormous success since the book was published, according to chief strategy officer Ronan Ryan. However that says more about some buy-side firms than it does about IEX. It is far from being the only venue that is able to counter HFT.
6) Is the book biased in favour of Goldman Sachs?
Lewis writes that GS co-operated with him, but the firm is said to be every bit as involved as other brokers. While Lewis does note is that GS decides to stop engaging in HFT earlier than some brokers, because it lacked the technological flexibility to support it, he is critical of the prosecution of Sergey Aleynikov, a programmer who was wrongly convicted for stealing HFT system code from Goldman Sachs.
7) Should I read the book?
Yes! And don’t read any reviews until you have.
Apr 16 2014
May this holiday bring us all Good Fortune and Health,
And may we all be thankful for those around us!
May the spring bring you Good Luck and Success and
We hope to do business together in future!
Apr 16 2014
ETNA will be exhibiting at SIFMA Operations Conference and Exhibition 2014. Stop by our booth #1003 for a live demo of ETNA Broker, an innovative while labeled brokerage platform with advanced HTML5 web trading terminal, native mobile trading applications for iOS and Android and superior customizable middle and back office.
ETNA Broker is designed to drastically reduce costs of maintenance, upgrades and new development of the trading platforms and financial applications.
“With increasing competition in financial services industry and brand new technologies getting outdated after just a couple years, smaller and medium companies can no longer afford maintaining their own trading software and they choose to lease over build,” commented Roman Zhukov, CEO of ETNA. “We provide broker dealers and financial technology firms with a state of the art all-in-one brokerage platform as well as trading development framework allowing them to focus on their unique value proposition.”
ETNA is honored to join SIFMA OPS Conference and Exhibition 2014 for insights into leading through change and to discuss the reforms and operational resiliency that are designed to strengthen the financial markets infrastructure. This year conference and exhibition will be opened by Rudy Giuliani, 107th Mayor of New York City (1993-2001), and Chairman and CEO of Giuliani Partners LLC, who will deliver the keynote address at the SIFMA 2014 Operations Conference and Exhibit in Boca Raton, Fla.
Headquartered in New York City, ETNA is a financial software and technology services provider, and has been delivering its financial software products and consultancy services to clients in the US, EMEA and APAC since 2002. ETNA provides customizable software products for online brokerage, execution, routing and crossing, clearing, compliance, risk management, back office automation, portfolio management and algo trading of all asset classes. ETNA’s white-labeled technology suite ETNA Broker enables broker dealers bootstrap their businesses in a matter of weeks.
For more information, please visit: ETNA Solutions
The Securities Industry and Financial Markets Association (SIFMA) is a leading securities industry trade group representing securities firms, banks, and asset management companies in the U.S. and Hong Kong.
Media Contact: ETNA Marketing Team, ETNA Software Corp., 855-779-7171, firstname.lastname@example.org
ETNA on Yahoo!Finance
Apr 8 2014
With one eye on businesses abandoned in the wake of the financial crisis and the other on a new generation of investors, startup companies are now raising significant sums to challenge the hegemony of big banks and investment firms.
Since the beginning of 2013, venture investors committed over $800 million in new funding to develop businesses providing new investment, lending, mortgage and real estate, and wealth management services in the U.S. These startups have had their best quarter so far in 2014, when 13 companies raised $238.2 million in later stage funding — with at least $162 million committed in March alone.
Meyer “Mickey” Malka, the founder of the venture investment firm Ribbit Capital, raised $100 million at the beginning of 2013 to invest behind this thesis.
“We only invest in companies that are disrupting the experience for consumers in financial services,” Malka said. “Over the next ten or fifteen years we are going to see a whole new field of financial services brands that are being built.”
The opportunity to carve out new businesses in vast swaths of traditional financial services firms’ operations means new billion dollar businesses can be made, according to investors and entrepreneurs. “This is one of the only markets that’s actually measured in trillions,” said Adam Nash, the chief executive officer of Wealthfront, a startup investment management firm. ”The market can be massively inefficient for hundreds of billions of dollars and somehow that is still not enough for the incumbents to go after.”
“Financial services industries are gigantic and are the least suited to making transformational changes in their own businesses,” said one venture capitalist whose firm invested in the $77 million round for OnDeck, a new small business lender.
Meanwhile, peer-to-peer consumer lending company Lending Club is entering the small business lending market with its own offering. “Since the recession small business lending has contracted,” said Scott Sanborn, the chief operating officer at Lending Club. The company is working on a private offering to a select group of investors to help bankroll the new initiative.
Other startups like CommonBond and Upstart are pitching ways for students to receive or refinance college loans.
On the flip side of the lending and debt market, sits the Ribbit Capital portfolio company Credit Karma, a provider of credit reporting and eventually optimization services. That San Francisco-based company raised $85 million in its own later-stage funding round in March.
“If you think about financial services products over the past twenty years not much has changed. Applications have come online and things have gotten faster, but we think there’s a lot more transparency that we can create and a lot more efficiency,” said CreditKarma chief executive Ken Lin.
Investors are also looking at providing these services to the underbanked with investments in companies like the credit and financial services tracking tool InVenture.
Credit management and lending offerings sit on one side of the ledger, on the other are a host of new wealth management and investment services tools for a new generation of investor. “Over 46% of income in the country will go to Gen Y [the millennials] by 2025,” said Nash. His company, and others like Betterment have seen significant growth on the back of new demand.
“Today we manage about $420 million in investor assets,” said Betterment chief executive Jon Stein. “We grew 4x over the last year… and four times the year before that. We’ve grown about four times just about every year that we’ve been around since we’ve launched.”
Their growth, and that of other wealth management services is partially explained by the fact that the U.S. is on the cusp of an enormous transfer of wealth.
“We’ve got the largest generational transference of wealth ever, happening,” said Jarrett Lillien, the founder of Bendigo Partners and chief executive officer at its portfolio company Kapitall — a new online trading platform. “$40 trillion is going to change hands.”
Kapitall received a $14 million commitment from Lillien’s firm, Bendigo, and Linden Venture Fund to capture some of that wealth. Unlike Wealthfront, which expects millennials to take a passive approach to investment management, Kapitall wants to engage active retail traders on its platform. It’s the same business that Lillien pursued as an executive at Etrade. “It’s taking something old and making it new again,” he said.
Posted Mar 24, 2014 by Jonathan Shieber (@jshieber)
Apr 4 2014
A scarcity of inhouse resources is holding back bank mobile app development times, with almost three quarters of banks taking anywhere from six months to over a year to release a new app to the market, says Finextra on behalf of CSC in their recent reserach .
of 104 senior banking executives from 74 different financial groups across 25 countries, found that banks are struggling to equate the traditional, overly-rigorous development approach with the fast-pace of change in the mobile world (the survey, which also has data on mobile IT budgets and prioritisation areas, is available to download here
Of those polled, fully 45% say they are able to develop and launch a new mobile application within six months to a year, with 22% saying it would take more than 12 months to get a new app off the ground. UK banks are more likely than their global peers to take more than a year (32% compared to 22% for the whole group).
In a modern financial technology industry time to market is the key to success. Being able to move quickly on profitable opportunities, staying ahead of your competition means you must have the latest and fastest technology on your side. Users are not going to want to wait months, or even years, for a mobile system; they will likely turn to competitors who have already implemented these innovative solutions.
Research shows those organizations that are more open to new approaches in developing their mobile components applications (using off-the-shelf solutions or offshore development) proved to be more responsive (eight percent compared to 24% for those that develop purely inhouse). Similarly, of those that outsource testing, only eight percent figure among the laggards.
Inhouse resource availability and productivity in general is seen as the greatest constraint to achieving better time to market. Developing a mobile application requires hiring additional developers, purchasing hardware and software, and spending large amounts of time and resources designing, programming, and testing software. To crown it all once the program is finally launched, you then have to spend time and resources maintaining, repairing, and keeping the software up-to-date.
A ready-to-use mobile trading terminal offered by ETNA
is designed for quickly implementing a state-of-the art native iOS/Android application that is both affordable and hassle free. The white labeled ready to use applications for iOS/Android feature:
- Advanced Charts
- Streaming quotes
- Orders/positions entry and monitoring
- Complex order types
- Real-time risk and PL
- Paper and simulated trading
- News and social trading
The platform is 100% customizable, allowing businesses to integrate their brand and choose which advanced features should be included. Thanks to ETNA, your business could launch a completely custom, state-of-the-art mobile trading terminal in a matter of days!
To learn more about how quickly your software can be up and running, or to receive a quote, contact us .
Mar 26 2014
The financial services sector has been wary of implementing cloud-based financial functions into their organizations
in the past, but a new survey has revealed that this could be about to change.
The Empowering Modern Finance: The CFO as Technology Evangelist report, published by Oracle, Accenture and Longitude Research, polled the opinions of 1,275 finance and line-of-business executives, discovering that attitudes towards cloud financial technology are thawing.
Just under a third (31.2 per cent) of respondents said they would not be making use of cloud technologies for financial accounting, meaning that over 68 per cent are either planning to use a cloud-based financial accounting system or are already doing so.
Over eight-in-ten respondents said they have implemented cloud-based financial consolidation and reporting software within their organisation, or will do so in the future.
Many CFOs are helping their companies make major strides toward the creation of a more productive and efficient technology-enabled finance function through the use of the cloud-based solutions available to them, but the report indicated that there is still a lot of work ahead for these companies and cloud providers.
ETNA Software offers various cloud hosting services for trading tools, analysis, order management, portfolio management, or simply loacate your entire trading infrastructure in a managed cloud.
Our flagship product ETNA Broker can be hosted both on client’s servers or in ETNA’s data center at Nasdaq FinQloud. ETNA has been building highly resilient electronic trading systems for over a decade. Uptime, failover, monitoring are the critical elements of ETNA Broker that reduce technology risks and guarantee platform’s stability. Dedicated Maintenance and 24/7 Support is available.
Learn more at http://etnasoft.com/etna-broker
Mar 22 2014
ETNA Broker is an all-in-one online brokerage platform for broker dealers and introducing brokers trading stocks, options, futures and forex, as well as new and exotic instruments.
Featuring web-based and mobile trading terminals, FINRA/SEC-compliant real-time middle and back office, ETNA Broker is provided as a white labeled customizable platform-as-a-service with a flexible usage-based pricing. Our clients only need a broker dealer license to run a business, ETNA provides and maintains all the technologies.
Learn more at http://etnasoft.com/etna-broker
Dec 24 2013
Dec 12 2013
IDC Financial Insights hosted a web conference “IDC Financial Insights 2014 Predictions: Worldwide Financial Services” highlighting the top 10 predictions for the year ahead:
- Overall IT Spend in Financial Services Will Exceed $430 Billion in 2014 and Will Exceed $0.5 Trillion by 2020; Consolidation and Cooling Emerging Markets Will Make Impact.
- Institutions Will Leverage Their Investments of the Past Three Years, Improving Compliance Data Management with New Initiatives to Extract Additional Business and Operational Value with Analytics-Based Capabilities.
- All Modernization and Improvement Initiatives Will Include Three Components to Be Successful (Technology, People, and Processes); We’ve Focused Too Long on Technology in a Vacuum, and in 2014, We’ll See the IT Organization Become More Important.
- The Most Successful Financial Institutions in 2014 Will Be Those That Can Deliver an Enhanced Omnichannel Experience to Their Customers and Prospects, Using New Enabling Technologies and Supported by Appropriate Business Processes.
- Core Transformation Projects Will Create Opportunities for Banks to Out-Innovate Their Peers, Giving Innovators Years of Technology Advantage Over Core Banking Laggards.
- Consumers Will Become the Disruptors in Financial Services by Minimizing Their Interactions with Their Primary Institution and Increasing the Use of a Variety of Purpose-Built Apps That Provide Immediate and Focused Value.
- Lured by Their Aggressive Growth in Premiums, Insurers Will Continue to Pay Close Attention to the Emerging Market Nations in Developing Asia/Pacific and Latin America.
- The Battle for Dominance on the 3rd Platform Will Begin as Firms Move from Ad Hoc, Repeatable Initiatives to Managed Initiatives and New Application Mashups That Target Value Creation in Customer Acquisition, Market Intelligence, and Operations.
- Investment in Risk Management Information Technologies, Services, and Skills Will Exceed $85 Billion in 2014 as Firms Industrialize Credit and Market Risk System, Operational Risk Disciplines Get Renewed Support, and Management Learns to Sell Risk.
- Mobile and “Alternative” Payment Adoption Will Remain Muted in 2014 as a Wide Array of Providers Try to Find a Value Proposition That Resonates for Both Merchants and Consumers.
The web conference featured analysts Scott Lundstrom, Michael Araneta, Li-May Chew, Marc DeCastro, Roberto Gutierrez, Alex Kwiatkowski, Karen Massey, Matt Sauer, Jerry Silva, Michael Versace and James Wester, and provided organizations with insight and perspective on long-term industry trends along with new themes that may be on the horizon.
According to Lundstrom, group vice president and general manager, IDC Financial Insights “As the IT organization continues to struggle with when and where to invest in today’s technology, financial institutions need to balance investing in innovation and providing value for the customer, with placating the regulators.”
Source Monitor Daily
Dec 10 2013
ETNA’s new announcement means that an online brokerage business can launch a custom, state-of-the-art trading platform in a matter of weeks.
NEW YORK, NEW YORK, December 9, 2013, No doubt ETNA’s recent announcement about their ETNA Broker, broker-dealer out-of-the-box technology solution, available as platform-as-a-service is good news to all retail broker-dealers and introducing brokers. ETNA Broker is an all-in-one brokerage platform with state-of-the-art web based and mobile trading terminals, order management system, and middle and back office management software. This trading platform, available for private-labeling, is designed for sell-side and buy-side firms, as well as technological firms and financial companies looking to upgrade their infrastructure for even more convenient stocks, options, Forex, and all major security classes trading experience.
During a recent interview, Roman Zhukov, CEO of ETNA, had this to say: “ETNA provides the latest brokerage technology to holders of a FINRA License while maintaining all the technologies compliant with the US regulatory framework. We’re glad to introduce our flexible pay-as-you-go pricing plans, which avoids any upfront costs for our clients”.
The ETNA Broker Suite consists of:
- Rich web-based HTML5 Trading Terminal
- Native iOS/Android trading terminals
- Access to multiple markets
- Pre-made integrations with clearing firms.
Each component is customizable and able to function as standalone or integrated into any third party trading infrastructure.
The company provides regular compliance updates and 24/7 support, and the cloud-based deployment allows clients to scale the system up and down as the volumes of data processed change to have more control over the hosting charges. ETNA’s unique offering of its ETNA Broker Suite as platform-as-a-service is the shortest and most cost-efficient way to enter the market or replace outdated trading infrastructure with innovative technology.
Headquartered in New York City, ETNA is one of the world’s leading financial software solutions and innovative technology services providers, and has been delivering its financial software products and consultancy services to clients in the US, EMEA and APAC since 2002. ETNA provides customizable solutions for online brokerage, execution, routing and crossing, clearing, compliance, risk management, back office automation, portfolio management and algo trading of all asset classes. Major company clients are Saxo Bank, Tradier, MicroQuant, SogoTrade, Trader OS, ChoiceTrade, ForexChile, TradeStreamAnalytics. ETNA is a proud member of FIX Protocol and its software regularly receives prestigious Barron’s Magazine Awards.
For more information, please visit: ETNA Solutions
Nov 28 2013