Back to Java

September 29, 2010

So I’m coding in Java again for the first time since 2003. I do prefer C++ or Python, and I’ve always – tongue in cheek – slated Java as the Cobol of the 21st century. But Eclipse is nice, so’s Maven, and generics are good too. BigDecimal sucks. But it does make me feel like I’m cycling with training wheels on…

If an FX dealer quotes a currency rate – say USDCHF – as 0.9877 that means USD is the base currency and CHF the term currency. The rate quoted is CHF/USD, the number of Swiss Francs to the US Dollar. If a client trades at the quoted rate, then the dealt currency is the one that specifies the unit of the trade. So if USD is the dealt currency, and the trade size is 10,000,000 then we’re trading 10,000,000USD. Which means a trade size of 987,700CHF. In this case CHF is the contra currency.

CLOB stifles innovation ?

September 14, 2010

Thanks to Matt for the heads up on this article. In pt III Tusar asserts that Trade-At “essentially creates the CLOB [consolidated limit order book]–the thing that everyone agrees would stifle innovation.”  Now my knowledge of algo equity execution is certainly not state of the art. But it’s news to me that there’s a body of opinion that thinks CLOBs stifle innovation. Certainly the advantage of CLOBs is that they aggregate liquidity for a security, and provide a public, visible live price during trading, and a record of open and close prices too. They also tend to come with clearing arrangements. This is exactly the arrangement that the industry has been inching towards for the OTC stuff that was so problematic in 2008, with the introduction of swaps clearing, which should improve transparency.

I suspect that Tusar is talking his own book. Plus ca change !  Of cause major broker dealers like Goldman want “innovation” in the form of multiple dark pools and execution venues, including their own. That leads to fragmented liquidity, which causes opacity and hinders price discovery. Which is good for Goldman, and bad for clients who will need expensive Goldman execution services.

Update: there’s an enlightening discussion of Trade-At here.

In Lars Kroijer‘s excellent Money Mavericks he describes executing his first trade after launching his hedge fund, Holte Capital in late 2002. It’s a $50K equity buy order, and his broker says “you do know this is only a 50 grand order, right ?” The broker goes on to suggest that his seniors won’t be happy with him handling such small orders. Lars finds the experience dispiriting, and starts to use his prime broker’s “cheap and electronic direct market access platforms” to execute.

So I guess one driver of single dealer platform flow is brokers at big firms dissing small clients who execute by voice !

Preparing for re-entry

September 6, 2010

After a delightful month off travelling round Europe with the family, I’m now limbering up for a return to work. I’m very busy with the other half setting up a new venture that she’ll be operating while I’m at work in the City. And I’m enjoying reading Lars Kroijer’s Money Mavericks – an account of starting and running his own hedge fund. The first few chapters offer a great combo of amusing career anecdotage and nuts and bolts info on starting your own business.