Execution management systems may be gaining adoption on the buy side, but high-frequency algorithmic trading shops don't need the broad features and bells and whistles typically included with available systems, contends Mark Skalabrin, CEO of Redline Trading Solutions, which offers an execution gateway and ticker plant solution to ultra-low-latency traders. According to Skalabrin, EMSs are too slow for high- frequency algo shops. "Many of the commercial market EMS solutions aren't solving their problems," he says. "[High-frequency traders are] looking at folks like us to introduce the latency management for high-frequency trading."
Skalabrin adds that HFT firms are counting on single-digit microsecond latency. While most EMSs on the market have reduced latency to as low as tens of microseconds, he notes, shops that depend on latency of just a few microseconds have had to build front-end execution platforms and ticker plants themselves.
"Most of them have delivered these pieces themselves and don't use off-the-shelf products," asserts Skalabrin. Noting that HFT shops trade their own money and therefore don't have outside clients, he adds that the home-grown platforms lack the bells and whistles of commercial platforms that are targeted at brokers with broad requirements.
Enter Redline (Woburn, Mass.), which offers a stripped down execution gateway with a simple, normalized interface to multiple exchanges for canceling, modifying and tracking orders, according to Skalabrin. "It's shielding the client from the exchange-specific protocols and providing an ultra-low-latency interface," he explains. "The typical HFT client builds order and execution management themselves, and with our execution gateway, we're allowing them to get off-the-shelf building blocks for their overall execution management that gives better performance than they could build for themselves."
As the exchanges send out messages about changes in bids and asks, Redline's system consumes the data and creates an order book for each exchange, Skalabrin relates, adding that clients can customize the feed they receive from Redline by choosing the symbols they want to track. Redline's ticker plant then provides a consolidated view across all of the exchanges and notifies the firm's trading application of changes. "The applications are making decisions on what to trade and where to trade, and when they decide to trade, then those trades go through our execution gateway," Skalabrin says.
On average, from the time the exchanges put out a message to the time the trading application is notified by Redline's software is less than 10 microseconds 99 percent of the time, Skalabrin claims. "The segment we're targeting is clients who want the lowest possible latency," he reiterates.
Skalabrin says the system's speed is enabled primarily by the way it is coded. "It's a combination of the architecture and how the software interacts with the application -- it's the actual techniques and process of coding the applications," he explains. "Factors that influence speed are the type of language we use, what network protocol stack we use and the way we use multiple cores at the same time on a server." 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