AlgoFast’s first partnership with another independent software vendor, trade routing, market data and technical analysis specialist CQG, takes the company a step closer to its ultimate goal of providing its algorithmic event trading software to the online retail market.
The partnership allows CQG to supply AlgoFast’s software with its global market data and trade execution capabilities. In practice, AlgoFast software receives real-time market data from CQG’s feed through the CQG Integrated Client or Trader API and then integrates the data with its indicators to power algorithmic execution strategies.
From a marketing perspective, the partnership extends AlgoFast’s reach into CQG’s customer base and provides its clients with access to CQG’s network of more than 40 co-located hosted exchange gateways. To date, the AlgoFast software, which was introduced in July 2012, has supported trading only on the Chicago Mercantile Exchange (CME).
AlgoFast founder Justin Bouchard, explains: “The novel event-based trading capabilities of AlgoFast will provide CQG’s user base with the ability to set predetermined trading strategies based on economic indicators from over 30 countries. AlgoFast’s existing user base executing on the CME is eager to take advantage of the exchanges offered on the CQG network.”
As well as partnering CQG, Algofast will continue to sell its software directly to clients including professional traders and proprietary trading firms that want to access futures exchanges using event-based trading capabilities. Both Algofast and CQG are offering a low-cost trial period for prospects and customers that would like to experience event-based algorithmic trade execution. Algofast reports some traders are already paying for the AlgoFast service, but notes that the numbers are not where it would like them to be, although this will remedied to some extent by its arrangement with CQG.
Bouchard says the company needs to gain traction with professional traders before approaching the retail market and, on this basis, is looking to secure more partnerships. One is expected to be forged with an online broker pretty soon, while the company is also writing an API to the functionality of another online broker.
As well as building market penetration, AlgoFast is developing its product and technology. The product relies on a machine readable news service from Dow Jones, but the company plans to integrate additional services over the next few months.
It is also working to improve latency. Bouchard says: “Latency is very important to AlgoFast. The software can execute in microseconds, but it could go faster and it will.” He acknowledges that a major consideration in news-based trading latency is the time it takes to deliver the news to the software and the barrier of the speed of light, but says it is possible to make a big difference to latency.
He explains: “We are talking to microwave and millimetre wave providers as they offer faster connection than the fibre connections we use now. Some news providers are also looking at ways to deliver news faster, so we are also talking to them. And we are considering how to take news from its origin and replace the connectivity used by the news provider with something faster. This could push latency down quickly.”