From Boston to Davos to Cross-Asset Trading

Cold, snow, and crossing boundaries of all kinds turned out to be the theme for the week of January 26th.  One such boundary crossing is cross-asset trading, where counter-party risk can leave traders out in the cold, fast. Cross-asset trading, especially including multi-legged trades with multiple counterparties, produces very high risk and complicated risk calculations.  Multi-legged trading requires constant data updates to monitor each trade’s lifecycle and the firm’s corresponding risk exposure.

Dealing With Technology landed on subscriber’s desks on January 26^th, with a special report on “Laying the Cornerstone for Cross-Asset Trading.”  In the report, business leaders including John Bates, founder and general manager of Progress Apama, discussed the common hurdles in deploying cross-asset trading platforms.  I thought about those deployments as I crossed a number of boundaries myself.

I attended the annual Progress Software Analyst Day event in cold, snowy, Boston on the 29th.  A global representation of customers spoke to industry analysts about their use of Progress products like Apama to solve business problems.  We were far away from the World Economic Forum in Davos, Switzerland, also running the same week, where news coverage featured the cold, the snow, global economic crisis, and an admission price of over USD 50,000 per person.  CNBC interviewed Thomas L. Friedman, who talked about investment in technology and business innovating its way out of crisis. 

The DWT special report participants spoke more accessibly about how close capital markets firms are to deploying truly cross-asset trading platforms with advanced capabilities such as multi-leg trades.  But the Apama consultants operate where the rubber really meets the road.  Some of them had come to the cold, snowy, greater Boston area from around the world for a week’s work too.  I visited some of their meetings for a detailed discussion of how Apama is used in the field.  Here are some real world experiences that they have had, helping customers create cross-asset trading applications with Apama:

• Trading options against futures
• Trading cash treasuries against treasury futures
• Algorithmic FX spot trading against FX futures
• Trading cross-border listed equities with a spot FX leg
• Adding FX futures as an asset class to an existing FX aggregation deployment
• Trading exchange-traded spreads that consist of two or more legs

Friedman’s comments in the CNBC/Davos interview were more around broad notions of innovation - like new energy technologies - than cross-asset trading, but taken generally I have to agree.  There’s innovation happening in our industry every day, and this activity will be an essential part of economic recovery.  I just hope the jet-set attendees found Davos worth the price.

-Dan