By Iqbal Brainch, Chief Marketing Officer, Advantage Futures
As electronic trading has grown over the past decade, so have the number of front-end trading platforms. Independent Software Vendors (ISV’s) have carved out a niche to meet the needs of today’s sophisticated traders. Advantage Futures remains a vendor-neutral FCM, allowing clients the flexibility to select the best fit for their trading needs. Determining the right software for your trading operation first requires you to understand the functionality you desire. This will be based on your trading strategies and sensitivities to various requirements such as latency, exchanges and products, charting, options and options market making, algorithmic/automated trading, custom configurations, and cost.
The equation gets further complicated as vendors add a variety of products and enhancements to broaden their reach in terms of offerings and appeal. Advantage Futures is in a position to help our clients determine the best software for their specific trading needs based on our experience with other clients and our relationships with the vendors. Our Technology Team works with clients to understand their unique requirements and to assist in the selection process and introductions when appropriate.
We recently met with a number of our more popular ISVs to better understand their products, value proposition and differentiation in the marketplace. While this is not an exhaustive report, the process shed light on the evolution of these vendors and their current position in the marketplace.
Futures Spread Trading
The natural trading software solutions for spread traders at Advantage currently include CQG, Stellar Trading Systems and Trading Technologies (TT). Functionality varies across the platforms and traders need to assess their requirements for market access, analytics, charting, and speed. TT started out as an execution platform whereas CQG was originally focused on charting and analytics. They both now have expanded their offerings to service all types of clients. Stellar, on the other hand, is a relatively newer front-end platform and they pride themselves in an architecture not weighed down by legacy products.
Options and Options Market Making
While simple options execution is available on most platforms, Advantage clients focused primarily on options and options market making tend to choose OptionsCity, Orc, ProOpticus or RTS. Orc and RTS, with their respective Liquidator and Tango environments, allow for a high level of customization, but do require significant resources for traders to build from the ground up. Options City offers Freeway for those clients looking for a standalone black box automated solution as well as the ability to use it with their off-the shelf Metro product.
Automated Solutions for Non-Programmers
Creating automated trading systems can be a resource intensive process. To meet the needs of traders who want to automate some of their systems or create algos, a number of vendors have created add-on packages to assist in the creation of automated trading packages. TTADL has been well publicized in this space as it allows for “drag and drop” modules in a very visual design format.
We are seeing new retail traders who have outgrown the Interactive Brokers and TradeStations of the world and are looking for more sophisticated trading solutions. These clients generally get started with either CQG Trader or CTS, both of which are ideally suited from both a pricing and functionality standpoint to meet the needs of retail clients.
Custom, Fully Automated Solutions
For traders concerned with latency and those running high frequency trading models that require fully automated systems developed from the ground up, Orc Liquidator and RTS Tango often represent the products of choice. Their open environments allow a great deal of flexibility and customization. In addition, these companies offer extensive and collaborative support to their clients.
Choices are Limitless
The choices for front end software are plentiful and Advantage has experience supporting most of our clients’ software choices. For traders who are not as latency sensitive and require more news integration, Bloomberg terminals may be an option. Some of our clients also use Rithmic, EOS, SunGard/Valdi, CME Direct and WebIce. For more information about selecting a front-end software provider, contact your Advantage Futures client representative at 312.800.7000 or email us at email@example.com.
CME Direct – A CME Group-Only Option
CME Direct is a free, highly configurable trading front-end that provides access to CME Group futures, options and OTC markets on a single, easy-to-use platform. CME Group launched CME Direct in May 2012 as a front-end to OTC energy markets. Since launch, they have enhanced the technology to support multi-asset class trading – still with a focus on commodity products – across futures, options and OTC markets. Most recently, CME Direct expanded the capability of its options trading functionality. Now, customers can use CME Direct to send Request for Quotes (RFQs) and execute covered and multi-leg strategies on CME Globex. In addition, CME Direct customers can benefit from CME Direct Messenger, an advanced instant messaging platform that integrates seamlessly with the front-end and provides customers intelligent message parsing and extensive collaboration technology.
CME Direct is designed to meet a range of trading needs and provide support across the trading life cycle.
Pre-Trade: CME Direct Messenger’s intelligent parsing and IM technology separates markets from conversations, converts text to data and helps traders capture and use critical market information.
Trade: Traders can access futures, options and OTC markets sideby- side, display real-time Block Trade data, send RFQs and execute covered and multi-leg option strategies on CME Globex.
Post-Trade: Straight-Through Processing enables real-time trade flow between front and middle office, and traders can rest easy with automation tools that eliminate dual-keying and re-entry errors.
Commercial and Hedge Fund traders have found the technology particularly well-suited to meet their commodity trading needs. Traders can choose the best way to execute trades using CME Direct – either online or through their voice broker. Brokers can view CME Group products on one screen to execute on a customer’s behalf, or they can use CME Direct to instantly process voice-negotiated blocks.
A mobile version of CME Direct is in the works. New versions are released = regularly, and because the software is delivered over the Internet, it is automatically updated ensuring customers always have the most up-to-date version with all of the latest features.
If you’ve been around the futures trading space for some time, you are likely familiar with CQG. CQG was founded in 1980, well before the emergence of electronic trading, as a charting and quotes platform.
The company, headquartered in Denver, Colorado, has continued its leadership in the area of charting and analytics by building a whole ecosystem around its flagship product CQG Integrated Client. The company has grown to 350+ employees, is co-located in global hubs including Sydney, Chicago, London, Singapore and Tokyo, and boasts about 7,000 users of CQG Integrated Client. The advanced charting and analytics functionality of CQG make it ideal for technical traders. In addition to 24-hour call and email support, CQG offers free training with product specialists, an extensive YouTube library of support videos and an innovative collection of add-ons available through the CQG Workspaces website.
CQG expanded its product offering to go beyond just charting and analytics. CQG Integrated Client caters to professional traders and is a formidable competitor to TT’s X_TRADER®. CQG Spreader adds spreading functionality and CQG Trader is the base offering targeting retail clients who may not require advanced technical analysis tools. In addition, CQG’s Continuum division offers a data and trading Enterprise API with global exchange connectivity. While the platform does not offer full support for algorithmic/automated traders, there is a formula builder and full integration with Microsoft Excel including the ability to set up trading directly through Excel. Moreover, CQG offers mobile access with CQG M for iOS devices and Android phones and tablets.
We have witnessed tremendous growth in the popularity of CQG at Advantage. CQG’s model of providing electronic trading tools, global market data and advanced analytics in one application makes for a compelling case. The size of CQG as a firm enables it to offer more bells and whistles than most front-end platforms. Professional traders who are more visually oriented, or looking for a higher level of support, and the simplicity of one application may be well served by CQG.
Cunningham Trading Systems (CTS) was founded in 2004 and named after one of its founding partners Bill Cunningham. Bill set up Cunningham Commodities as a clearing member and a FCM in 1982, and saw an opportunity to provide a trading solution for floor traders migrating to electronic trading. While the majority of CTS’s clients are former traders in Chicago, they also take on business from clients around the country. Their transactional pricing structure, with a cap, appeals to both professional and retail traders.
CTS was originally developed for point-and-click traders. The firm added exchange supported spread trading as well as a professional options package which provides greeks and volatility analytics. The majority of traders using CTS trade products on the CME Group complex of products and ICE Exchange. CTS also offers connectivity to EUREX, LIFFE and LME. They host servers at 350 E. Cermak in Chicago and at the CBOT.
CTS caters to traders who require reliability, but not necessarily the lowest latency. The CTS software can be downloaded to a PC desktop or accessed through the web which allows for mobile access as well. With over 3,000 active traders, CTS has become a formidable competitor to CQG and TT. Support for locals and reliability of CTS have made it the third most popular front-end at Advantage.
All budding entrepreneurs dream of quitting their jobs, starting a new company, and eventually raising venture capital funding. Hazem Dawani, CEO OptionsCity, did just that when he launched OptionsCity in October 2006. He had been working for Chicago Trading Company as a software engineer and realized electronic trading was here to stay. Moreover, he recognized an opportunity for simplifying and streamlining the processes for electronic trading when it came to options market making. Along with Rudy Fasouliotis and Victor Glava, he started OptionsCity and developed the first version of their flagship product Metro. Initially, they focused on developing a collaborative environment to allow teams of traders to trade together specific to market making in the treasury options on futures market. The CME was their first exchange connection and as they expanded their product capabilities, Eurodollar options, CBOE products, grains, and others were added. They currently support over 20 exchange connections globally.
In 2010, OptionsCity launched Freeway, an engine for trading automation which offers an environment for the quick development and deployment of custom strategies. Freeway can be used in conjunction with Metro or as a stand-alone black-box automated solution. More recently, OptionsCity expanded its offering to include hosting services and greater support for OTC products. Today, 40% of OptionsCity customers are market makers and the rest are made up of proprietary and institutional traders as well as those who use the platform for options pricing and risk management.
As OptionsCity looks forward, they anticipate a high level of growth from European and Asian markets (currently 90% of their business is from U.S. customers). To help fuel this growth, they recently raised a round of growth funding from financial/tech-focused VC firm Edison Ventures. In addition to offices in Chicago and New York, OptionsCity opened an office in London, establishing a gateway to the European markets.
OptionsCity tries to differentiate itself from the competition with the level of support they provide their customers. Specifically, Level I support is available 24-hours a day from former traders who answer trading-related questions. Level II support consists of Linux specialists who work with customers to resolve technical issues related to the software or implementation.
While Dawani would not reveal any specifics for future products, he hinted that the next generation of OptionsCity products would be launching later this year with an emphasis on custom development tools by way of the Algo Store, a marketplace of algorithmic innovation and a community they have been nurturing through the Chicago Algorithmic Trading Conference: for Developers, by Developers which was launched two years ago and boasted 350 attendees in 2013.
From its origins as a 1980s pioneer in electronic trading, Orc has evolved into a global player in trading technology for listed derivatives. Building on its legacy of innovation and entrepreneurial spirit, half of their 220 employees globally are focused on R&D. Orc continues to serve the options market making industry, while expanding operations to include over 150 exchanges and gateways.
Orc recently launched renewed and expanded solutions, including Trading and Electronic Execution offerings backed by Professional Services. The suite of products and services is geared towards professional trading groups with sophisticated requirements for low latency, high frequency trading.
Notable products include Orc Liquidator and Orc Market Maker. Orc Liquidator is an automated derivatives trading engine relied on by many banks, hedge funds, and proprietary trading firms for implementing and executing their trading strategies. Orc Market Maker is a market making application.
Additionally, Orc offers a range of products for various trading styles including Orc Trader which is a highly customizable execution platform that enables traders to capture opportunities in the futures and options space as well as complex combinations in the market. Flexibility and ease of integration are key characteristics of its renewed offering. Clients may also choose the Orc platform solely for connectivity to a wide range of exchanges.
Orc applies a long-term view on all client relationships and engages in extensive on-boarding with new clients. Consistent with this model, Orc offers service and support through a specific account manager rather than a call center.
Through their Professional Services, Orc’s technology, development and industry expertise is made available to clients, addressing many needs of clients with or without internal development staff. There is a clear shift in positioning for Orc to transform its trading screen origins into a trading technology solutions provider.
Consistently dedicating a large share of its staff and resources to research and development, Orc is renowned as a high-performance solutions provider, combining leading edge technology with solid experience from major global markets and understanding of the evolving regulatory landscape.
RTS, a global provider of electronic trading solutions, was founded in 1990 by father and son; Engelbert and Steffen Gemuenden. At that time, RTS developed a ground breaking platform for electronic options on Eurex and has grown into a global company with 10 offices worldwide and about 200 employees. The company prides itself in their competitive advantage of providing multi-asset class trading across 150 exchanges worldwide.
The majority of RTS clients trade futures utilizing fully automated strategies. Their flagship platforms – Tango and Tango Trader – offer clients the ability to shave weeks off programming efforts and benefit from performance gains with ultra-low latency global market access.
RTS clients often straddle the build vs. buy fence. This allows RTS to offer the best alternative to a fully customized in house solution, without the investment in a development team. RTS has been able to bundle high-performance features onto an innovative and easy to use front end. Clients also experience a unique consultative approach to support based on one to one interaction.
While RTS and Tango have become synonymous with high end trading operations; RTD Tango Trader combines the automation and speed of Tango with the familiarity of point and click trading. This effectively joins best in class algo performance with ease of use. RTD Tango Trader also has a number of performance rich features: Automated/Algo Trading, News, Charting and Spreading, all on a single screen.
With RTD Tango QUANT, traders deploy complex quantitative strategies through an intuitive, visual front end, and analyze data through a state-of-the-art historical charting environment. Successful strategies are easily identified via RTS’ built in back-testing environment.
As with other higher end trading platforms, RTS is a server-side solution – taking full advantage of proximity hosting. RTS offers global exchange connectivity and hosting along with multi broker support.
Stellar Trading Systems, incorporated in 2003, brings increased competition to the ISV space with its aggressive focus on performance and functionality. Based in London, Stellar has an established global customer base trading futures, options, cash treasuries and equity markets. Customers access Stellar either on their own servers or directly from Stellar’s fully hosted ASP platform which offers connectivity to an extensive number of markets and collocation facilities.
Stellar appeals to professional traders ranging from point and click traders to sophisticated high volume, latency sensitive traders using a broad range of products and asset classes. Spread traders are well served by the low-latency Stellar spreadMachine, while Quantum Server is an ideal platform upon which to build a wide variety of algorithmic or automated strategies. Stellar also has an open API as well as good FIX capabilities.
Other functionality within Stellar includes a wide variety of synthetic order types, Stellar Aggregator, Stellar Charts, and back testing. The flexible Stellar front end makes it easy for new users to create a familiar look and feel.
In many ways Stellar positions itself as an attractive alternative to some of the traditional vendors, touting its newer architecture and extensive functionality that does not suffer from the same burdens of a legacy system. Stellar has experienced significant growth in European and Asian markets and continues to expand in the more entrenched North American markets as well.
Following the acquisition of GL TRADE by SunGard in 2008, the company’s market data, trading and post trade solutions were integrated into SunGard’s Global Trading business, and the company’s listed trading solutions (including GL and Brass) were subsequently incorporated under the Valdi brand. SunGard has been at the forefront of global exchange-traded derivatives trading for over 25 years, and offers access to 75+ derivatives exchanges and all major clearing venues worldwide. SunGard’s Valdi is a suite of global multi-asset trading solutions for listed equities, derivatives, commodities and fixed income instruments, which includes market data and advanced trade, order, execution and liquidity management systems as well as pre-trade and post-trade risk and compliance solutions. With a suite of hosted and managed trading services, and connectivity to the SunGard Global Network (SGN) trading community, Valdi helps you cost-effectively expand your business and achieve high performance execution across multiple platforms, instruments and geographies.
While the Valdi suite spans a broad range of software solutions, Valdi Trader and Valdi Trader Lite are the flagship products for derivatives screen trading. Valdi Trader offers a broad range of trading styles across all major asset classes and trading venues, including spreading functionality with user-defined spreads. Valdi Trader Lite is the version specialized for Derivatives traders, providing tailored and efficient ergonomics for selection, monitoring and trading of single-leg, complex and custom instruments. It’s thin client technology makes it easy to deploy and “lite” on the trader’s computer, without any sacrifice to functionality.
SunGard’s Valdi Options Risk Manager (formerly known as MicroHedge) is an options risk management solution that helps firms mitigate trading risk. This solution can quickly and easily manage options risk on a large scale across thousands of accounts for listed options and the underlying equities, futures and indices. As an ASP-based solution, Valdi Options Risk Manager helps hedge funds, proprietary traders, and market makers manage risk cost effectively in real-time. As SunGard continues to extend the scope of its futures and options trading and risk solutions, and to onboard new traders and brokers across the world, we expect to see more uptake in the product offerings.
Trading Technologies has long enjoyed the market leader position in the futures industry front-end trading software space. While recently celebrating its 20th anniversary as a firm, the company is on the verge of a major transformation. This transformation starts at the top with Rick Lane taking over as CEO in February 2014. Lane, 33, replaced Harris Brumfield who served as CEO for 11 years and remains the majority owner and Chairman of the Board. Lane has taken on the daunting challenge of revitalizing the 800-pound gorilla in the industry at a time when competitors have been aggressively stealing market share from TT. His vision for the future is an ambitious one – to transform TT into a technology company more akin to what you might see in Silicon Valley. The influence of his time at Google is apparent in the complete redesign of TT offices into a more open, collaborative and fun workspace. Company perks include a game room, free drinks and snacks, and an employee laptop program. At the heart of this transformation is Nextrader, a revolutionary way to leverage the cloud and make TT an entirely web-based, fully-hosted solution due for release before the end of this year.
Nextrader is being built from the ground up so it’s not tied to any legacy architecture that weighs down other platforms such as TT’s X_TRADER®. It utilizes the same familiar user interface as X_TRADER®, but with a Linux-based platform increasing the speed of operations multi-fold. The new software also will do away with the need for traders to invest in their own servers as all of the heavy lifting will be done by TT’s colocated servers. Nextrader will allow for unlimited access points by taking advantage of today’s reliance on mobile platforms including iOS iPhones and iPads as well as devices on the Android and Windows platforms. All essential functionality available today, including ADL (Algo Design Lab), will be available through Nextrader. TT and Nextrader will continue to cater to professional traders, both buy-side (Hedge funds, CTAs, pension funds) and sell-side (banks, FCMs).
The launch of Nextrader and the transformation of TT will be watched closely by not only customers of TT, but by the industry as a whole to see if this vision of software-as-a-service can succeed in an industry steeped in tradition and legacy systems.