Free Site Registration

The Future of Trading

10 Top CIOs on Wall Street |  Why Mutation Will Matter |  Buyside Traders: Not Taking Orders Any More |  Calculating Cost First, Trading Second |  Trading Desk, in One Box |  Changing the Minds of Star Programmers |  2015: The Always On Desk

2015: The Always On Desk

November 4, 2010
By Tom Steinert-Threlkeld

And there are already precedents. Cotton, cocoa and coffee futures trade from 5 p.m. each Sunday to 4:15 p.m. each Friday, Chicago time, with only a 45-minute break before trading resumes at 5 p.m. each day. Similarly, currencies are traded 24 hours a day, from Sunday afternoon to Friday afternoon, thanks to sequential activity on markets in London and Frankfurt, for instance; followed by activity in New York; followed by activity in Sydney, Tokyo and Singapore.

But equities markets are exceptions. The same financial instruments do not trade in all markets at all times, around the world. Those traders who enjoy working the late-night shift in the Big Apple?

“They just might not be buying IBM at 4 a.m. in the morning,’’ said Ruth Colquiri, managing director and head of product management at UNX, an agency brokerage and supplier of trading technology.

There are practical problems, she says, such as manning support desks, not just trading desks, 24 x 5 or 24 x6. There are also timing issues, resolving in every trade just what time it is and what time zone to go by in executing and tracking trades. And the international dateline does not help.

ALWAYS-ON ELECTRONS

But there is little question that technology is on its way to expand the types of high-speed connections that will make instantaneous trading around the globe practical and increasingly competitive. And that the math is arriving that makes it possible to enact any trading strategy through algorithms that not only execute what traders have been thinking about doing, but also start to read their minds, in effect.

A startup called Spread Networks this year opened up a 825-mile route between New York and Chicago that eschewed railroad lines and, if need be, bored right through mountains to get the most direct route for light to travel between the two major U.S. financial centers.

The route could complete roundtrips in 13.33 thousandths of a second. Spread’s chief executive, David Barksdale, said its route was only the latest, fastest route and would not be the last to hold that title.

“The speed of light is actually too slow,” said Paul Schoenauer, director of system engineering for Ciena, a supplier to Spread that specializes in high-performance networking gear.

At this point, he says, fiber itself can be getting in the way of the light taking digital instructions between markets. Right now, he figures that optical networks are only operating at two-thirds the speed of light.

Besides the straight-line approach of Spread Networks, which tries to remove curves and turns from the path of light pulses, the other obstacle that could get removed is the fiber itself. In a fashion.

Companies such as BlazePhotonics in the United Kingdom have been promising hollow-core fiber for years. The idea is to send light through air, to speed it up. No fiber drag. But, so far, it’s not clear that any company can deliver a hollow-core fiber that is any faster than fiber itself.

But there is little question that automation will continue to take over basic functions of the trading desk and make humans less a part of the process, on typical days of buying and selling securities of all types for portfolio managers.

Download the Report