“The Only Thing That Is Constant Is Change.”
I wonder if Greek philosopher Heraclitus was talking about the financial industry when he said this. In this industry, constant change is the norm. Besides the prices themselves being volatile, there are a number of other changes that are occurring with an almost daily frequency. Political decisions dramatically impact the markets. Just look at how the British pound plunged to its lowest level since 1985 after the Brexit vote. New regulations force trading organizations to invest in staff and technology to ensure compliance. Exchanges disappear as a result of consolidation, like in the recent purchase of NYSE/Euronext by ICE, while entire new exchanges are being created, like the Nasdaq Futures exchange. New financial instruments and products are also added at a constant clip, like the addition of weekly Treasury options. Even long standing assumptions on how to price certain financial instruments change overnight, like the introduction of a new method of pricing Energy Strip Strategies. Other less visible changes include shifts in the technology and protocols used to access programmatically the exchange matching engine.
Why are these changes occurring?
The reasons behind these changes are numerous. As technology advances, exchanges are looking to stay competitive. Moreover, most exchanges are public companies with expectations from their shareholders to continue growth. Many exchanges are adding new products in order to increase volumes and give their customers more execution and hedging alternatives. In general, the market participants, the customers to these exchanges, are pushing for change and the exchanges are responding positively. For example, the introduction of the Market Segment Gateway was a change introduced by the CME Group in order to achieve a higher level of democratization for electronic market participants. This product leveraged cutting edge developments in hardware-accelerated software. The impact on a market participant when it comes to these changes is tremendous. Being “out of the market” for any period of time due to a technical or trading strategy gap can be catastrophic for trading firms, especially in today’s highly competitive trading conditions. When a firm is not ready to adapt changes, it is at risk for going out of business.
Change Delivery at OptionsCity
At OptionsCity, we take our role of delivering mission-critical trading technology very seriously and have a long track record of successfully incorporating changes. We are always on the front line to ensure that change does not affect our customers and that they are ready to go on day one.
As an example, take a look at CME’s recent Energy Strip Strategies pricing update which resulted from a change in the conventional pricing method from an additive-price model to an average-price model that is more commonly seen in OTC energy markets. The change itself was not well publicized but it clearly had a drastic impact on pricing. For example, three contracts priced at $0.40, $0.50 and $0.60 would have previously been quoted at $1.50. The average-price model results in a new price of $0.50. Failing to update this could have severely distorted prices, causing the trading firm to enter losing positions.
In this particular case, we worked for weeks to incorporate the change into our back-end modeling as well as our front-end view to ensure energy traders could trade Strip strategies with confidence from the start. We understand that very few, if any, additional vendors were up-and-running on day one. OptionsCity’s customers, however, were able to trade with confidence without any hiccups or delays.
Over the past year, OptionsCity has continually worked with exchanges to offer new products and provide technological updates that power robust trading strategies.
Here’s just a sampling of what that looked like:
- Low latency connection to new exchanges – Nasdaq Futures, EEX
- Support for new products – weekly Treasury options, calendar spread options on various commodities, NFX’s power futures and options
- Support for Exchange protocol updates – recent updates from the CME on segment gateways, an upcoming CBOE API, changes to the ICE API
The bottom line: At OptionsCity, our customers don’t have to worry about the complexity involved in supporting and trading on sophisticated exchanges that evolve with changing needs.