Quants Aim for the Clouds —Private Only
When Amazon’s Elastic Compute Cloud service (EC2) suffered a partial outage on April 21st taking down several online sites, it didn’t send shivers through the financial trading community. That's because brokers, hedge funds and other types of trading firms concerned about privacy, security and protecting their competitive advantage are not going to put their clients order flow or their portfolio holdings into the public cloud.
While few firms on Wall Street will route orders through the public cloud, developers of quant trading systems are tapping into private clouds. Stuart Farr, president of Deltix, Inc. contends that quantitative, automated trading platforms are highly suited for the cloud, since they are collocated in data centers to shorten the distance to the market data and the exchange matching engines.
Deltix recently launched a high frequency, quant-trading solution in April hosted by Investment Technology Group in various data centers. ITG will provide access to low-latency market data and connectivity to exchanges. The arrangement will enable ITG’s clients – hedge funds, proprietary trading firms and CTAs— to create, backtest and deploy trading strategies.
“With our hosted solution with ITG, you can do both research and production in the same environment. That’s the big breakthrough!” says Farr. This means “the algorithms are on machines in the collocation facility which is physically in the cloud,” says Farr. “While the people running those algos are sitting on Wall Street, they are connected to the colocated facility by a private network. All the work is being done in the colocated facility,” says Farr.
The next step is for quant trading firms developing algos to move their research into the cloud, according to Farr. Research requires massive amounts of market data — gigabytes and terabytes of market data is required for research, he explains. Farr believes that people will use cloud computing to solve the problem of how do you get that data from an exchange to an office in Wall Street. “Your research tools can be running in a collocated facility and then you use the cloud to access the tools,” he says. “Then the research part of trading would be sitting in the cloud along with the trading environment,” says Farr.
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
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