OptionsCity Software is offering multi-asset derivatives traders a consolidated solution for algorithmic strategy building, testing and execution through the integration of its recently released Freeway Analytics with its existing Freeway automated trading technology. The analytics solution initially uses historical futures market data from Vertex Analytics and allows traders to focus on developing trading strategies rather than integrating large volumes of data.
Freeway Analytics is hosted by OptionsCity – the historical data is hosted by Vertex – and includes a visualisation engine that allows traders to see how strategies and trades will perform in different market conditions over time and an exchange simulator that ensures trading models take into account real-world latency and dynamic market conditions.
The analytics are tightly integrated with the Vertex data, avoiding the data management issues of integrating third-party market data, although such integration can be done. Statistical analysis tools, such as Matlab and R, can also be integrated into the analytics’ open architecture, supporting the development of sophisticated mathematical models outside the stream-based trading environment and their reintegration into Freeway Analytics.
Andrew Lisy, algo product manager at OptionsCity, says: “Before joining OptionsCity, I was a low latency and algo trader, and trading was all about latency. The focus is now shifting from the fastest systems to the smartest systems. The value is in analysing more and more data to make the right trades, fast.”
While the OptionsCity trading platform supports basic analytics, Freeway Analytics is a big push into more sophisticated analytics and the last element, for the moment at least, in building a consolidated and fast solution for analytics and trading.
The company selected Vertex as its source of historical futures market data on the basis that it can provide large volumes of data and analytics from exchanges including CME, CBOT, NYMEX and IntercontinentalExchange, and delivers both data and analytics in real time. This partnership, says Lisy, is a starting point, with OptionsCity considering further integration arrangements with providers of different types of historical market data.
The company sources its exchange data directly from 15 U.S. exchanges, plus NYSE Euronext and NYSE Liffe in Europe. More domestic exchanges will be added depending on customer demand and the company may build out exchange connectivity more widely across Europe, and perhaps across other geographies, over time.
The OptionsCity trading platform is based on Java and runs on specialised versions of Java Virtual Machine and Linux. The analytics component is also written in Java and makes direct calls to Vertex historical futures market data that is used for back-testing and simulation. The Vertex big data repository and data architecture technology are proprietary, but based on Microsoft Windows technology, and according to Vertex were not particularly difficult to integrate with OptionsCity’s technology.
OptionsCity brought Freeway Analytics to market in October 2013, offering it as an independent product that can be integrated with the trading platform or used as a stand-alone solution. Lisy explains: “We have over 400 individuals from medium-sized trading firms to large banks using our trading platform. Some need the additional analytics and some don’t. Our first customers for Freeway Analytics are not existing users of the trading platform, they are mostly proprietary trading firms trading futures and options, and they are all in the U.S. We expect some will convert to our trading technology and integrate the analytics to achieve a consolidated trading environment.”
If these are early days for Freeway Analytics, they are also fairly early days for OptionsCity, which was founded in 2006 with the initial aim of helping small trading firms compete with large trading firms. The Freeway trading technology was introduced about two years ago, helping the company to grow beyond its focus on small firms and target larger prop trading firms, financial institutions and banks.
The company started with three founders in Chicago and now has over 50 employees across offices in Chicago, New York and London. Earlier this year, it announced its first external capital investment from growth equity firm Edison Ventures, an investment that gives Edison a minority stake in the company and OptionsCity the means to accelerate sales and marketing, product innovation and international expansion.
Lisy says the company is still working on its product roadmap, but will be adding more analytics to its portfolio as well as enhancements to the Freeway trading platform and Metro, its electronic market making and trading platform.
From Vertex’s point of view, the partnership with OptionsCity provides an additional outlet for its data, with OptionsCity paying a one-time license fee for the data and the cost of data to the user being included in the cost of the hosted Freeway Analytics solution. While Vertex is currently offering historical futures and options data, it, too, plans to source data from more exchanges. Plans for 2014 include the addition of historical equities market data.
James Austin, CEO and founder of Vertex, says: “The core of what we do is move data from our hosted solution. We have built a big data architecture that can handle a massive amount of data and we have built compression algos to deliver data fast, particularly to customers using fibre networks.”
Vertex was founded in 2009 with the aim of using new technologies to develop data products and front-end tools including visualisation tools. Its first product, Vertex Helm, a straightforward but powerful interface tool for historical data, is still in play. It has since added ECHO, a visual interface to historical and real time data that is combined with complex event processing. It is the data behind ECHO that is leveraged by OptionsCity’s Freeway Analytics. The company also offers RECALL, which allows historical market data to be played back and paused to provide a picture of activity in a market at any point in time.
Like OptionsCity, Vertex is a young and growing company headquartered in Chicago. It has 10 employees and has towards 100 customers across target markets including proprietary trading firms, market makers and commodity trading advisors. In the short-term, its concentration is on enhancing existing products – a redesign of ECHO is due to be released in the first quarter of 2014 – and adding more data from U.S. exchanges. Longer term, like OptionsCity, it could source data from exchanges in other parts of the world and move into new geographic markets.