Chris Donnan : Programming - Brooklyn Style
software, trading, family, fun
Posted AI/ Machine Learning, algorithmic trading on Sunday, April 13th, 2008.
Here is a quickie primer on AISs or immune system inspired algorithms. Essentially AISs do a good job of figuring out what is ‘itself’ or ‘normal’ and what is ‘non-self’, ‘alien’ or ‘abnormal’ in a system. Antigens are components that find pathogens (antigens find patterns that are normal to them, the non-normal things then are pathogens).
Some ~2 or 3 years ago, MIT’s Journal of Evolutionary Computation had a ’special issue’ on AISs. There were several interesting publications in that particular issue, and it led me on a minor reading splurge regarding AISs. At the time, I had been heavily focused on evolutionary and other bio-inspired algorithms and their applications for automated trading systems. There are a ton of algorithms in this class, many of them have mappings to various sub-problems in automated trading.
As far as I can find, there is no work out there currently that applies AISs to finding mis-priced options, and it seems quite a good fit. Searching over a sea of options to sort out which one seem to be aberrations may be a good match. AISs are relatively efficient algorithms compared to alternatives. Interestingly - it would not even necessarily involve your own option pricing model - you would be basically letting the AIS sort out what seem to be ‘normal’ pricings and what seem to stand out as odd.
This is obviously one component of the puzzle, sorting out if the option should be bought or sold is another component. This particular technique could also be applied to any other derivative market with ample liquidity, not just options.
Just some nonsense that has been meandering around my brain for a week or so, so I figured I would write it up here.
-Chris
Posted algorithmic trading, trading on Saturday, February 16th, 2008.
Several others in blogland are ref’ing this - but it is excellent - so I will too:
There are just tons of interesting stats on electronic trading, multi-asset trading, etc. My favorite excerpt:
Overwhelming sense of expectation of a Single Trading Platform
85% of buy-side respondents expected to be able to use a single platform for all of their institution’s wholesale electronic trading activity. The majority of those respondents (55%) expected this to happen within two years. This perhaps contrasts with the fact that the buyside did not appear to consider “range of products†as such an important factor in the selection of a trading platform.
Posted algorithmic trading, programming on Sunday, July 29th, 2007.
FPL Press Release: FPL Announces FIX Algorithmic Trading Definition Language Enters Beta Phase
The gist is that if you have a GUI to exec trades @ VWAP, Implementation Shortfall, TWAP, Custom Algo X, Y and Z - these may all have different parameters. In fact - the spec goes as far as detailing parameters, validation and GUI controls. Interesting 
Now - when we need to add new algos to a trading GUI - if we render our UIs based on the spec - there will be no new work - just point to the new XML data - and we have new UIs that send the correct data to the execution endpoint - sounds good - lets see when it is ready to go.
-Chris
Posted algorithmic trading, trading on Friday, July 13th, 2007.
The current Waters issue has an interesting article about day trading shops that are heavily using automated trading components to carry out their money making activities. Essentially - they are automating more - yet still letting the humans do a part of the work. In the past - the balance was 100% human in the beginnig - eventually we started making indicators, formulas etc and “automating” some of the human intuition of trading. At the other end of the spectrum is the “black box” no humans involved trading. Somewhere in the middle is the “gray box” where we are doing more than creating “indicators” and letting an algo execute an order elegantly - but automating more and more of the process - while allowing humans to stick around.
When consulting for individual prop traders, it was often considered a bad practice to override the system with your dirty human intervention. I can think offhand of 3 past clients. 1 client always “gray box traded” LOTS of automated system stuff - human intervention - mostly regarding exit strategy. This guy made lots of money. 2 other clients overrode their systems - “gray box style” and burned money like a bonfire. I guess I am just not clear if this is a bad thing or a good thing in general… Now that I think about it - I think even the “black box-est” hands off auto-traders I know always sometimes touch their systems for one reason or another - a much darker gray box i guess. Anyhow - I guess the day trading fiasco will continue and we will see how these folks do.
-Chris
Posted algorithmic trading, trading on Monday, July 9th, 2007.
Via the Mostly blog (good stuff) here - Wall St. & Tech has another article on OMS/EMSÂ convergence in the vendor space. This is a trend that will continue until people don’t talk about OMS/EMSs as separate things I think. This trend I have been watching ever since I got to work on a pre-EMS-era - EMS for chasing mini futures orders (or not chasing them).
 -Chris
Posted algorithmic trading on Saturday, February 3rd, 2007.
Congrats Anton!
Quant House acquires SmartQuant program trading technology
I have used SmartQuant for years. I started looking at while it was an open source C++ project many years ago now. SmartQuant is a .net based framework for developing automated trading systems. I own a license from a few years ago with a trader partner of mine (Rod - you are the man!). We actually had an option (expired useless as most do) to extend our license to be ‘available to commercially resell’ SmartQuant. We never got to all that - too many other things goin’ on.
The product has matured much over the past several years. I licensed it when the product was ’smartquant’. Since then - the product changed a bunch and became ‘quant developer’ I believe. I had used it in fits and starts for various auto-trading projects. At times - it was great and helpful, at times - a punishment - as all software is at times. It is a very well written bit of software I can say with certainty. I hope the best for all involved here.
The guys at QuantHouse have made a great play in my way of thinking. You can really write autotrading systems in C#, VB, C++ - any CLR compliant language. They provide a nice IDE - things like ‘meta-strategies’, some basic optimization options, some neural net ’stuff’ and a great general toolbox for developing, testing and running trading systems.
Best of luck guys!
Chris