CQG said Tuesday it has added real-time price capture, error detection and risk management features to its trading platform, by working with algorithm supplier Progress Software.This is the second result of a partnership first disclosed in November. That gave the CQG futures trading platform the ability to automate trading activity and employ custom algorithms provided by Progress Apama. CQG gives futures traders routing, graphics and technical analysis tools.The latest iteration of the CQG/Progress Software partnership – known officially as Progress Apama AutoEx for CQG Integrated Client – aims to make use of automation to allow automated to detect real-time market conditions for a trading opportunity and execute resting orders in ways which achieve both tighter price control and better execution. The new tools also mitigate the inherent risks of custom trading strategies.According to Dan Hubscher, senior product marketing manager for capital markets at the Progress Apama division of Progress Software, the algorithmic trading unit, the true benefit of the integrated CQG/Progress Apama platform is its ability to provide automation and “real-time action” for commodity futures trading strategies.“When the trader has defined a general strategy, Progress Apama complex event processing (CEP) software will decide the best conditions to enter the system and automates that decision,” as opposed to having a human trader act on the trading opportunity, Hubscher said. He added: “The problem (human) traders face with the old system is that even though they might detect an ideal time to trade, they can never act fast enough before the market begins to move on them. They will literally end up watching the price on a trade move away; with Apama’s speed, the true benefit comes with the ability to capture the optimal price and then exit at the optimal price.”Hubscher also noted that while the system can prevent against standard errors such as fat finger trades, the upgrade system employs a level of artificial intelligence that ensures that if traders writing a particular type of strategy make a mistake in logic, e.g., a trader employing a multiple entry and exit strategy fails to correctly anticipate some market conditions and expects the market to go up when it actually goes down, the pre-built trading logic will block those particular trade orders. “You can anticipate some types of mistakes and the system has the logic to protect against that,” he said. What the system is not yet able to do is select an alternative strategy and then instantly act upon it.Paul Zubulake, a senior analyst at Aite Group, pointed out that as more futures traders shift to the use of automated trading platforms, there will be a heightened need for better risk management capabilities among the wide array of futures trading platforms. These include offerings from Bloomberg, FFastFill, Orc Software, RTS Group, Thomson Reuters and Trading Technologies International (ITT) in addition to CQG. Thus, any integration of futures trading platforms with CEP capabilities “make a lot of sense. There is definitely a need for more advanced ways of doing risk management.”However, he cautioned that with the addition of risk management features, traders need to investigate the level of sophistication of any particular offering. Does the system simply prevent against fat finger traders or can they provide more advanced forms of risk management? Questions also need to be asked about the degree to which any risk management features may or may not slow down trading activity. “The major challenge in integrating any new pre-trade, risk management features is not slowing down the process of getting to the marketplace,” he said.This article can also be found at SecuritiesIndustry.com.
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