Algorithmic TradingandFIX Protocol

Sergey Troshin, Ph.D.Directorst@exante.eu

Moscow, March 2016

Anton AntonovHead of OPS

aan@exante.euwww.exante.eu

Содержание

• Алгоритмическая торговля. Классы алгоритмов (10 мин)• Инфраструктура современного брокера (10 мин)• FIX протокол. Основные концепции (40 мин)– Тэги и сообщения– Dictionary файл– Разница между версиями– Как читать FIX спецификацию брокера

• FIX протокол. Пример реализации на С# (20 мин)• Вопросы и ответы (10 мин)

Algorithmic Trading

Algorithmic trading

Automatic trading

HFT – high frequency trading

Algorithmic Trading

How does Execution Works?

Order driven market model

–Market Order– Limit Order

Automatic trading

Buy-side Sell-side

Statistical arbitrageVWAPMarket Making / HFT

Trend following

Arbitrage

Smart order routing

Well Known Strategies.

Automatic trading

Market Making and Scalping

Trend Following

Technical Analysis• SMA / EMA• Moving Average

Convergence/Divergence• Bollinger bands• Stochastic oscillator• Parabolic SAR• Rate of Change (ROC)• Relative Strength Index (RSI)• etc• …

Volume Weighted Average Price

Volatility and Option Trading

Implied volatility prediction

1. Delta neutral portfolio– Buy option / sell stock on volatility going up– Sell Option / buy stock on volatility going down

2. Various options strategies– Straddle– Strangle– Butterfly– Etc.

Arbitrage Strategy Example

GAZPRU(MICEX)

On new tick:

ogzd_rub = convert(ogzd, usd_rub)spread = normalize(ogzd_rub/gazpru)

changedSpread()OGZD(LSE)

USD/RUB(FOREX)

LIMIT (LSE)

London Server

Filled (size)

MARKET (MICEX)

Filled (price)

On change spread:if (spread > threshold) place_limit(OGZD, price, size)

On limit fill:If (limit_is_filled) place_market(GAZPRU, size)

Parameters: threshold

Another example: S&P stocks on NYSE and NASDAQ in NY against Futures on CME in Chicago

Pairs Trading and Statistical Arbitrage

Market neutral portfolio– Short one set of stocks– Long another set– Rebalance very often

• Pair Trading– Coca-Cola (KO) and Pepsi (PEP)– Renault (RNO) and PSA Peugeot Citroen (UG)

• Statistical Arbitrage– Up to 1000+ stocks in portfolio– Huge quantitive calculations

How to Compare Strategies?

Sharp Ratio

Which is better?

Strategy Sharp Ratio Calculations HFT / Delay Sensitive?

Trend FollowingMean revision

Bad Easy No

Volatility Trading Bad Hard No

Arbitrage / Pair trading

Good Easy Yes

Statistical Arbitrage

Good Hard Yes

Market Making Good Easy Yes

Technology

Market data

Delays

Market Depth Best Bid Offer

Trades

Execution

Delays

Client side / Server side

Pre-trade risks, Software

Connection

Protocol

Virtual Machines

Co-location

Control

Trades Export

Interface

Error handling

Technical Broker Infrastructure

EXANTE Platform

inin

ATP

out

Customized backoffice reporting

API(FIX)

Platform

300 +Servers

->What is located on servers?

-> Where are other exchanges?

-> Where FIX server is located?-> What is algorithm?

FIX Server Location

One exchange– Low latency algorithm• Exchange data center

– No special requirements• Back up data center or any random data center

Several exchanges– Arbitrage with low latency algorithm• Exchange data center (exchange depends on algorithm) • Dedicate link to other exchanges

– No special requirements• Any data center (non exchange preferably)• Common Internet link

Creating an Algorithm

• Any programming language• 3rd party software• Run algorithm on your server or in

broker’s VM• Control through the trading terminal

Trading Terminal

• Market Analysis• Manual trading• FIX orders control• Account control

-> What about other servers?

Trading Data and Client Accounts Processing

+ DEMO environment+ Development servers

FIX Protocol. Main Concepts

Origins

Versions

• 4.2

• 4.4

• 5.0

• FIXML• FIX FAST

The two parts of FIX

Communication partners

• Initiator• Acceptor

Why FIX?

Structure: Tags

TAG=VALUE[SOH]35=A[SOH]35=A[SOH]34=1[SOH]|35=A|34=1|

Structure: Message

8=FIX.4.4|9=125|35=A|34=1|49=EXAMPLE_TRADE_UAT|52=20160318-14:28:55.885|56=EXANTE_TRADE_UAT|98=0|108=30|141=Y|553=User|554=PA55W0RD|10=217|

Structure: Message 2

8=FIX.4.4|9=192|35=D|34=241|49=EXAMPLE_TRADE_UAT|52=20160318-16:53:18.655|56=EXANTE_TRADE_UAT|1=TST1111.001|11=20160315152146019575|22=111|38=37|40=1|48=AAPL.NASDAQ|54=2|55=blank|59=3|60=20160318-16:53:18.653|10=225|

Structure: Component blocks

146=3

55=SHAREA

207=EXCHANGE

55=SHAREB

207=EXCHANGE

55=SHAREC207=EXCHANGE

Message types

Admin:35=0 Heartbeat35=5 Logout35=A Logon

Application:35=D New Order - Single

35=8 Execution Report

35=3 Reject

Fix engines

• FIX Antenna C++:• QuickFIX• QuickFIX/J• VersaFix• UL FIX

Certification

Dictionary files

FIX Specification

Logging and debugging

FIX Protocol. C# Example

• EXANTE’s Demo program overview• QuickFix lib and Project dependencies • Configuration files• Application class• Methods to override• Some implement samples:– Market data subscribe and receive– Getting symbols list

https://bitbucket.org/SergeyTroshin/exante-fix-sample

Project Dependencies

Classes to Implement

QuickFIX minimum

QuickFIX. Configuration Files

Feeder Application

Feeder Application Class. From Server.

Feeder Application. Receive Market Data.

Feeder Application Class. Subscribe for Market Data.

Broker Application

Broker Application. From Server.

Broker Application. Symbol List Request.

FIX Specification. Symbol List Response.

Broker Application. Symbol List Response.

Using EXANTE FIX Wrapper

Links

• www.exante.eu• support@exante.eu• http://elato.se/minifix/• http://www.quickfixengine.org/• http://btobits.com/fixopaedia/fixdic44/index.html• https://bitbucket.org/SergeyTroshin/exante-fix-sample

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Questions?

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