Deep Blue Capital Dives into Asia with QuantHouse Data

Deep Blue Capital will use QuantHouse to source data from exchanges across Asia-Pacific

Stat arb trading firm targets Asian expansion, taps QuantHouse for low-latency access to Asian exchanges.

Deep Blue Capital, a Dutch automated trading firm specializing in statistical arbitrage, is expanding its global trading activities into Asia, and will source low-latency data from the main Asia-Pacific markets via French low-latency technology and data vendor QuantHouse, under an expanded relationship with the vendor, announced last week.

The firm currently sources European and US data via QuantHouse's ultra-low-latency QuantFeed datafeed, but is expected to expand its existing deal to include data from Hong Kong Exchanges and Clearing, the SGX Singapore Exchange, the Australian Securities Exchange, the Osaka Securities Exchange, the Tokyo Stock Exchange and the Tokyo Financial Exchange imminently, according to Duncan Sands, chief technology officer at Deep Blue Capital, who says the firm's ultimate goal is to trade on all major exchanges around the world.

"We started in Europe because we are a European company. We then moved to trading in the US, primarily on Nasdaq as it's a fast market. The next step is to move to Asia, as we think there is plenty of opportunity for trading," Sands says. "And, of course, for that you need prices coming in from the major exchanges."

Deep Blue first approached QuantHouse two years ago -- prior to the vendor's rumoured $142 million acquisition by S&P Capital IQ -- after slow response times to pricing errors from the firm's previous unnamed market data supplier led it to build codes into its own algorithms to anticipate poor data quality.

"We were working with another data provider who provided an integrated data and trading solution, but the problem we had was bad quality of data, where prices were just clearly wrong," particularly for full-depth order book data Sands says. "If we were just looking at the best bid and ask prices, we probably wouldn't have noticed half of the errors -- for example, best bid prices weren't always in descending order, and internally we were not always quoting the best price from the order book, so we picked up a lot more bogus data," he adds.

In comparison, a key advantage of QuantHouse is the speed with which the French data vendor resolves any issues in its data: where QuantHouse will to take a week to fix an error after being notified, the firm's previous legacy provider could take much longer, Sands adds. "Often, we would tell them, and a year later it had disappeared into a black hole. And not only does QuantHouse provide us with better quality data and service compared to our previous data provider, it's also costing us a lot less."

In addition to QuantFeed, Deep Blue Capital has used QuantHouse's QuantLink fiber-optic trading infrastructure to connect between exchange data sources and the firm's servers at proximity hosting facilities in Europe and the US to support its trading activities, and has added servers in QuantHouse's space at third-party datacenters as it added connectivity to new markets, Sands says. The firm currently has no plans to deploy servers at proximity locations in Asia, but may consider this in future if it is successful in the region, he adds.

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