Opening Cross: Let’s Face The Music And Dance

Worried about market volatility? Thankfully, there are plenty of tools and experienced professionals to help you through any uncertainty.

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A shock result; an underdog triumphant; one side elated; the other side dejected; both sides probably equally surprised; and the implications have yet to fully play out—I’m talking, of course, about the Chicago Cubs’ World Series win, ending a 108-year championship drought. Oh, and Donald Trump.

If you’re still in shock at the US election result—regardless of whether you supported Trump or Hillary Clinton—you might be tempted to throw out every intelligence tool or analytics program you’ve ever relied on to support an important financial or business decision and start again from scratch. While it’s true that no serious source accurately predicted the outcome*, it may be premature to panic about what degree of certainty you can place in future decisions.

(*Actually, that’s not entirely true. Statistical political analysis website Fivethirtyeight.com’s Nate Silver didn’t back Trump to win, but did accurately predict that he had as much chance of winning as the Cubs did.)

It’s certainly true that there will be a period of uncertainty and perhaps instability as the markets react to the reality of a Trump presidency. How long this lasts will likely depend on what he does between now and when he takes office to flesh out policies, set up a strong cabinet, and make peace between two political parties—as well as in-party factions—that couldn’t be more polar opposites.

However, political and economic uncertainty is good news if you’re a volatility trader. And there’s even more good news for vol traders: Australian index firm T3Index has created a suite of US dollar and euro-denominated volatility indexes that will give investors the potential to trade volatility more directly than by using swaptions. Even better news: T3Index will make its data available for free, and only charge those who license the indexes to create tradable contracts.

Wth increased volatility may come spikes in trading volumes. Unsure whether your trading platforms or analytics systems will be able to cope with uncertain markets? You’re in luck: low-latency ticker plant and feed handler vendor Redline Trading Solutions and remote systems monitoring and support provider West Highland Support Services have just the things for you. 

Redline has begun offering clients access to a market simulator tool that it developed to test its own products, which is designed to behave in the same way as an exchange matching engine, and which incorporates clients’ own trading data for a realistic simulation of market activity. Not designed to gauge the success of clients’ trading strategies themselves, the tool instead tests the stability of the systems running those strategies before deploying them into a live market environment. Meanwhile, West Highland has created a dashboard that displays cost, contract and performance information sourced from the company’s various monitoring services, to give data managers and cost-conscious c-level executives an overview of market data’s impact on their business.

The reason West Highland can do this is its long-standing expertise in this space. Also recognizing the value of experience is low-latency data platform and feed handler provider Vela Trading Technologies, which has hired S&P’s Brian Cassin and ICE/Interactive Data’s Ollie Cadman to head product and strategy. Likewise, startup data platform Qineqt has recently brought on Ed Crespy—whose time in the industry includes 18 years at Bloomberg—as a data architect to work on the vendor’s data model. 

Of course, if you don’t believe in appointing the most qualified candidates, you can always just resort to throwing mud at your rivals and hope some of it sticks, like the war of words that has arisen over the Chicago Stock Exchange’s proposed “speed bump,” which has attracted some choice words from Citadel Securities, alleging that CHX is just looking to artificially boost its data revenues. CHX says it is willing to compromise and run a test period to reassure its critics. Unfortunately, I suspect we won’t see that same flexibility among politicians for some time. 

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