QuantXpress - The Financial Blog

Ridgecrest to Develop a New Internalization System

2009-04-06T18:04:00.003+05:30

Ridgecrest plans to develop an internalization system as part of its existing trading platform.
The new, as-yet unnamed internalization system will work with the existing Smart Order Routing System and Order Management System. The new system will be filling the missing part of Ridgecrest trading platform.

Overview of Internalization

Large brokerage firms that have huge amounts of natural liquidity from customers flowing through their trading desks, are offering buy-side traders the ability to cross their trades internally. In some cases, brokers are registering their internal crossing networks as alternative trading systems (ATSs) to make these networks more attractive to the buy side by bringing in regulatory oversight and opening them up to external sources of liquidity.

In simply, this is called crossing the natural flow. The Natural flow is the stream of buy and sell orders that institutional and/or retail customers route through the sell-side trading desks, direct market access (DMA) platforms or algorithmic strategies. Internal crossing enables brokers to potentially match both sides of trades within their own shops.

Advantages of Internalization

Sell-side firms say the advantage of these internal crossing networks is that they obtain the best price and incur less market impact than if orders were routed externally to exchanges and ECNs (Electronic Communication Networks). They may be buying at the bid or meeting in the middle when they're crossing. They're typically not going to be paying the spread.
Beyond the obvious spread savings, the liquidity provided by sell-side crossing networks offers the buy side a lower-impact way of trading, because these orders have the opportunity to trade with other natural liquidity directly in addition to participating actively in the market.
Unlike exchanges and ECNs, which display their quotes, crossing networks' quotes are not displayed and, therefore, offer anonymity, so there is less chance of information leakage. Because the crossing networks are not displaying a quote in the public market, they may not have as much impact as they would if the order was routed to an exchange or ECN. Further, internal crossing networks allow brokers to find matches without paying fees to exchanges and ECNs.
Brokers that operate crossing networks as ATSs could be entitled to earn market data fees under Regulation NMS (Natinal Market System). If firms match trades internally, they are required to print the trades on an exchange. The exchanges then sell the market data and allocate a portion of the revenues back to their participants. Many of the same firms that are registering ATSs also have taken stakes in regional exchanges. If a firm starts an ATS, it potentially can print the trade on an exchange in which it has an investment and qualify for a share of the market data revenues.
The trend also is being driven by Wall Street's desire to cut costs in a world of compressed spreads and shrinking commissions. With equity commissions paid to brokers declining from 4 cents or 5 cents per share for traditional block trades to 1 cent or 2 cents a share for algorithmic trades - and even fractions of a penny for DMA trades - there is an economic incentive to cross orders internally before routing outbound.
ATSs benefits the brokers economically. They would keep both sides of the trades. They would make a commission on both sides of it.

Attracting Customers

In today's electronic trading environment, brokers also recognize the opportunity to capture more business by registering their crossing networks as ATSs. While the concept of Internalization via automated execution was invented by the Madoffs in the 1970s, according to analysts and trading executives, until recently, most of this sell-side crossing activity was conducted by voice brokers. With the growth of algorithmic trading, through which institutions are slicing and dicing their block orders and routing them electronically, however, brokers are automating the process to match up the orders internally.

While internal broker crossing networks match orders utilizing both customer and principal flows, some of the new crossing networks that are classified as ATSs also are connecting to external liquidity sources, such as external ATS systems as well as ECNs and exchanges.

But boosting liquidity isn't the only reason to register as an ATS. Another reason brokers are registering their crossing networks as ATSs is because the sell-side crossing networks include both customer and principal flows, which makes some buy-side traders uneasy. By filing as an ATS, a sell-side crossing network invites regulatory oversight with the goal of making buy-side traders more comfortable with the service.

Crossing Concerns

Clients should have a choice between crossing only versus other clients, or trading versus all the available liquidity.
Brokers that do proprietary trading can aggregate all the data from the crosses to glean information about trading patterns that can then be used to customers' disadvantage.
Internalization algorithm based issues.
If they see there are 3 million shares to buy and 100 million shares for sale in their system, how do they deal with that?
A lot of the ATSs don't print to a tape anywhere. This starts to lose some sense of what the market is; what it's actually doing.

Ridgecrest Announces FIXMonitor and FIXAdaptor New Releases....

2009-03-05T18:25:00.013+05:30

Ridgecrest today announced the availability of FIXMonitor version 1.00.000 and FIXAdaptor version 1.04.000 of its FIX product line. The new releases include a host of new features and enhancements to both products, including support for Linux based Operating Systems and support for multiple databases.

Recommended links

View a complete list of New FIXMonitor Features with screenshots.

View a complete list of New FIXAdaptor Features with screenshots.

Download a free trial of any of the Ridgecrest products.

Stay tuned for more information....

FIXMonitor - An effective tool to monitor your FIX messages

2009-02-16T11:51:00.012+05:30

We are happy to announce that Ridgecrest is releasing QxLink in March 2009. QxLink is a total product solution with consists of FIXAdaptor, FIXMonitor and FIX Log Viewer.

Here we discuss the features of the product FIXMonitor.

About FIXMonitor

FIXMonitor is a solution for all the FIX users to capture the FIX traffic of a network and to view it with advanced filtering features. It will non-intrusively monitor your FIX infrastructure and gives you a real-time display of all FIX messages while simultaneously persisting all messages to a database.

You can run FIXMonitor in both Windows and Unix environments. The web based GUI allows you to view FIX traffic in any major browser. And the configuration can be done through the config files including the network you need to capture.

Database Supportability

We provide the facility to persist the FIX traffic to a database. The database can be configured in Oracle, PostgreSQL or in MySQL and the implementation supports DB2 and Sybase though we haven't tested on them yet.

We provide couple of views for the user to view the FIX traffic.

Current View
Archive View
Log View

Current View

The current view displays the real time FIX traffic and allows you to filter the traffic. The current view is limited to 150 messages.

Features available in the current view

Filters according to message types
Hide heartbeats
Filters according to session
Filters according to originated IP address
Provides the user defined alerts for price and quantities
Provides a search option for messages
Hides message header and tailor
Search within the FIX messages
Orders messages accordingly to received time
Supports for custom filters

Archive View

In archive view you can select a session which u need to view the relevant archived FIX traffic.

Features available in the archive view

Quick view of the archived messages with easy navigation buttons
Filter messages according to message types
Hide heartbeats
Display messages according to selected session
Provides a search option for messages
Filter messages according to a date or date range
Support custom filters
Hides message header and tailor
Order messages accordingly message received time
Search inside a FIX message
Allow to generate reports for the FIX traffic

Log View

In log view we provide the facility to view the FIX standard log files with the features of current view.

Integration with FIXAdaptor

As FIXMonitor comes under QxLink with FIXAdaptor, you can generate a configuration file for FIXAdaptor for message transforming. FIXAdaptor allows you to transform messages for the defined rules for a session.

You will be able to download QxLink by March 2009 and if you have any comments or suggestions about QxLink please let us know. It will help us to improve our product further.

QuantXpress - The Financial Blog

2009-01-30T14:34:00.002+05:30

Empowering community through knowledge sharing...

About QuantXpress Blog:

This blog is maintained by the Financial Applications Team at Ridgecrest. Our objective is to share our knowledge, experience and opinions with financial community and the general public. These areas are including but not limited to financial market, latest technologies in financial markets, investments and other financial/ technology related aspects. We hope this blog will provide a good platform for such discussions and you will get something from this. We are very happy to moving forward together as a community and we welcome your ideas, feedback and knowledge contribution for empowering the community.

About Ridgecrest:

Ridgecrest was found in 2006 by two Wall Street veterans. Ridgecrest provides products and services to the financial services community. Ridgecrest focuses on trading and investment technology, with an emphasis on supporting the rapid implementation of quantitative and algorithmic strategies.

What are Financial Markets?

Financial market is a market for financial instruments, in which buyers and sellers find each other and create or exchange financial assets. Financial market allows people to easily trade (buy/ sell) financial securities (such as stocks, bonds etc.) and other items. Sometimes these are organized in a particular place and/or institution, but often they exist more broadly through communication among dispersed buyers and sellers. There are several types of trading in financial markets including,

Equities
Options
Forex
Bonds

FIX Protocol:

Financial Information eXchange (FIX) protocol is an electronic communications protocol initiated in 1992 for international real-time exchange of information related to the securities transactions and markets. It is a series of messaging specifications for the electronic communication of trade-related messages.

It has been developed through the collaboration of banks, broker-dealers, exchanges, industry utilities and associations, institutional investors, and information technology providers from around the world. These market participants share a vision of a common, global language for the automated trading of financial instruments.
FIX is the industry-driven messaging standard that is changing the face of the global financial services sector, as firms use the protocol to transact in an electronic, transparent, cost efficient and timely manner.

Learn more about FIX

Coming Soon...

We hope to post some interesting articles soon. Hope you will enjoy and gain a good knowledge from them.

Thanks for reading...