September 24, 2006
Posted by Dan Gallagher
Up until recently I had no idea what Program Trading was all about, other than the fact that anyone who has worked in the area tends to be highly sought after due to the nature of the business.
Program trading can mainly be found in sell side institutions and the main players are Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley and Citigroup. It offers products such as DMA (Direct Market Access), Algorithmic trading and Prop trading.
The technology behind program trading is used to allow financial institutions to computerise or automate trades that were previously done by hand. With the advent of algorithmic trading banks can now apply an algorithim to the program to break up the trade in order to maximise profits.
All this is made possible by having a very stong, reliable technology infrastructure. Banks allocate millions of pounds to creating cutting edge platforms for program trading. The majority tend to build their own in house applications and each system is made up of four key components; trading software, order routing, data feeds and risk/position management.
The trading software is the user interface for the application and is known as the GUI. This is generally developed using front end technologies and it appears that C# or Java is the language of choice.
Order routing applications allow banks to route trades to exchanges and ECNs. As program trading is reliant on speed of execution it is critical for these systems to be well built. It is in the space that we see FIX (Financial Informaiton Exchange) and messaging technologies such as Tibco RV.
DMA is a method of looking at liquity across different markets and time zones and there are many products which can be used that allow this to happen. Companies such as NYFIX and GL Trade provide custom built solutions for financial institutions.
Another key component for program trading is the handling of data. Data feeds handle real-time and historical data which are used to monitor and model market movements. This is what allows institutions to build algorithims which can then be tweaked in order to create market winning strategies.
Risk and portfolio management is an essential component of any program trading set up. It allows traders to watch how the profit and loss potential from any trade as the market moves. Pricing engines or analytic engines are built using C++ that aggregate risk by trade or book. Complex data is stored in specialized databases such as KDb which allows fast access to information.
From a recruting perspective what makes program trading so interesting is the need to find candidates who have very specialized experience in one of the above areas. My experience to date tells me that it is very hard to find people who have an indepth knowledge of all facets of program trading. However, for those who do work in the area it is one area within finance technology that needs continuous investment in order to keep up with your competitors.
If you have experience in program trading and would like to explore new opportunities please feel free to contact me.
Posted by Dan Gallagher
Up until recently I had no idea what Program Trading was all about, other than the fact that anyone who has worked in the area tends to be highly sought after due to the nature of the business.
Program trading can mainly be found in sell side institutions and the main players are Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley and Citigroup. It offers products such as DMA (Direct Market Access), Algorithmic trading and Prop trading.
The technology behind program trading is used to allow financial institutions to computerise or automate trades that were previously done by hand. With the advent of algorithmic trading banks can now apply an algorithim to the program to break up the trade in order to maximise profits.
All this is made possible by having a very stong, reliable technology infrastructure. Banks allocate millions of pounds to creating cutting edge platforms for program trading. The majority tend to build their own in house applications and each system is made up of four key components; trading software, order routing, data feeds and risk/position management.
The trading software is the user interface for the application and is known as the GUI. This is generally developed using front end technologies and it appears that C# or Java is the language of choice.
Order routing applications allow banks to route trades to exchanges and ECNs. As program trading is reliant on speed of execution it is critical for these systems to be well built. It is in the space that we see FIX (Financial Informaiton Exchange) and messaging technologies such as Tibco RV.
DMA is a method of looking at liquity across different markets and time zones and there are many products which can be used that allow this to happen. Companies such as NYFIX and GL Trade provide custom built solutions for financial institutions.
Another key component for program trading is the handling of data. Data feeds handle real-time and historical data which are used to monitor and model market movements. This is what allows institutions to build algorithims which can then be tweaked in order to create market winning strategies.
Risk and portfolio management is an essential component of any program trading set up. It allows traders to watch how the profit and loss potential from any trade as the market moves. Pricing engines or analytic engines are built using C++ that aggregate risk by trade or book. Complex data is stored in specialized databases such as KDb which allows fast access to information.
From a recruting perspective what makes program trading so interesting is the need to find candidates who have very specialized experience in one of the above areas. My experience to date tells me that it is very hard to find people who have an indepth knowledge of all facets of program trading. However, for those who do work in the area it is one area within finance technology that needs continuous investment in order to keep up with your competitors.
If you have experience in program trading and would like to explore new opportunities please feel free to contact me.
