Options Expands FX Connectivity for Quant Trading Firms

Citing demand from quantitative trading outfits, Options, (formerly known as Options IT) has expanded connectivity to global foreign exchange markets and dealers and connectivity between major trading venues in New Jersey and Chicago.

Through its managed infrastructure platform, Options now offers connectivity to more than 60 markets, including ultra-fast connectivity from the Savvis NJ2 and Equinox NJ4 data centers to Barclays, Citi, Credit Suisse, Currenex, Deutsche Bank, EBS, operated by ICAP, FXall, Reuters Dealing, UBS and Hotspot FX (Knight).

“We’ve had some FX destinations on the platform already but we recently picked up some buy-side clients that wanted us to connect with other FX brokers,” said Ken Barnes, principal, SVP corporate development at Options in an interview.

NJ2 and NJ4 have a high concentration of electronic and OTC market makers and ECNs, noted Barnes. Options runs its cloud-based infrastructure in those two data centers and can cross connect to the FX markets and dealers. “Anybody who is running their servers in our cloud can connect to the amrekt data and order flow,” said Barnes. The brokers are also in the data centers as their algorithms are colocated there, he explained.

While EBS distributes their matching engines around the world in Europe and in Asia, Barnes said, all the other markets operate one matching engine in the U.S. Customers are using Options to host their servers in the U.S. and trade in those markets.

Commenting in the release, Options CEO Nigel Kneafsey, said “Our new connections to global FX markets, reflect our ongoing strategy of offering direct connections to every significant trading venue globally on the Options PIPE platform.”

In addition to its FX expansion, Options said it recently upgraded its primary route from New Jersey to Chicago to the fastest lit fiber path available in the market, achieving a 14.1 millisecond round trip time. Options built a direct route from Nasdaq OMX’s data center in Cartaret, N.J. to the Equinix site in Chicago at 350 E. Cermak Road. “It’s really the futures to equities, to indexes to options that is most relevant for that link, not to mention futures to FX since FX futures would be traded on the CME and arbitraged to FX in NY2 and NY4,” said Barnes.

Options is seeing activity from quantitative trading firms and hedge funds in the alternative investment community, which are not members of exchanges, and are considered to be on the buy side, said Barnes.

It mirrors a trend that the industry has seen in electronic trading, said Barnes, who expects to see a new wave of direct connectivity to trading venues when rules for swap execution facilities (SEFs) are finalized. “I think we’re on the cusp of the SEF announcements. We’re going to see SEFs in fixed income derivatives and in OTC derivatives trading, he said. “It’s an important trend,” he added. As trading firms diversify and new asset classes attract a lot of electronic flow, Barnes finds that trading firms are looking to rent rather than buy the infrastructure.

Trading firms can “focus on writing the applications, and we can give them the infrastructure, networks, storage and servers,” Barnes explained. Options also offers Momentum, an application monitoring suite so that if firms have an algo or proprietary app or OMS, EMS, when the app is on the verge of an incident, it detects the problem and notifies them how to quickly respond to it.

“Customers are tired of making coarse grained investments in servers and data centers. They want to buy by the drink. We can do that. We can say you can add services, destinations; we can scale by the price,” said Barnes.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio