By Mark Cooper, Business Development Manager at Exponential-e
In the rush for speed in trading, ex¬changes are building huge data centres where members, non-members and traders place computers containing their trading algorithms next to an exchange’s matching engine, which matches ‘buy’ and ‘sell’ orders. Otherwise known as colocation, the practice shaves crucial milliseconds from the time it takes to complete a trade.
Fundamental in today’s market is being faster than your rivals to the best price and having the lowest latency. Delays are no longer an option. When traders’ computers are situated too far away from an exchange, they face a delay of milliseconds whenever they seek to trade a price via their computer screen. Due to this automated process of trading by algorithms, few serious investors can afford to be that late to prices that flash so quickly; indeed many traders now function in the smaller realm of microseconds.
The need for greater capacity and more efficiency of time to trade is thus increasingly important. The fragmentation of the foreign exchange markets means that connectivity solutions are critical to the success of trading operations, and colocation services, where specialist service providers host traders servers as close as possible to matching engines, are growing in popularity.
Helping smaller players compete
Colocation is not a new concept, and has been around for some time. It works exceedingly well as a hosting option for small businesses that want the features of a larger IT department at a fraction of the cost. While corporations may have a team of IT professionals and the infrastructure to host their own web servers, smaller companies struggle to compete. Ten years ago the emphasis was very much on expanding an enterprise’s own internal computer centres. However, there is now a growing trend towards IT outsourcing – be that equipment, staff, infrastructure or other elements required for moving and storing data. In the EMEA region for example, Forrester has confirmed that close to 60% of data centres are using some form of hosted facility.
Modern enterprises are increasingly finding that developing their own, internal data centres is prohibitively expensive. Enterprises are still wary of expenditure and CIOs are under immense pressure to reduce costs and operate more efficiently, despite the increasing complexity of their infrastructure.
The total cost of ownership for data centre infrastructure can be extremely high, not only in terms of the initial capital expenditure (CapEx) – i.e. the cost to design, build, test and commission – but also because of the inevitable, on-going operational expenditure (OpEx). For example, the TCO of a rack in a data centre is approximately US $120,000 over the data centre’s lifetime – around half of this is CapEx and half is OpEx. With data centres accounting for 20-30% of enterprise OpEx, many CIOs are looking for ways to shoulder the burden differently.
Hosted data centres are becoming increasingly popular amongst FX players, because utilising shared data centre infrastructure can provide multiple points of cost savings. By using a hosted data centre, enterprises can pay only for on-going expenses, such as power costs. Even in terms of OpEx, hosted data centres can help their enterprise customers run their facilities more efficiently and less expensively.
There is also the issue of speed. FX traders are well aware that we now live in a world where high-speed connectivity, 24×7 availability, unshakable reliability and comprehensive security are demanded. As networks have grown in speed, reach and ubiquity, their complexity has also grown in line. This growth of network complexity has produced many more potential points of degradation and failure and while the chances of potential outages have increased. So too have the negative consequences for companies facing any downtime, which in the world of high-frequency trading, can have serious negative effects on profits and success.
For traders further afield, the situation is much the same. A trader out in the Middle East for example, will experience latency delays, meaning price information and trade signals will be slowed. However, if his server is located next to the exchange matching engine, then he is in the optimum place to receive data in the fastest way. In other words, if his servers are located next to the matching engines, they’ll have the same advantages as everyone else. In London there may be several places to connect to, but by having one proximate location, he would be able to plug into lots of them more effectively.
Colocation is also a great option for smaller firms not only because they would not require new data centres to implement it, but also because it is often more simple and effective to take space in a data centre which the bank or broker is located in. One of the services Exponential-e provides is the availability of existing space in these facilities which it can effectively sub-let and provided to smaller firms as a managed space without them needing to take out a full rack. We analyse and advise small firms on the optimum place to co-locate and are also able to connect them to multiple points on our own network.
The FX challenges
As any trader will tell you, time is always of the essence. The biggest challenge present today in high- frequency trading is the need to be the fastest, have space in the right locations with the fastest connections and easy to make hardware enhancements. High-frequency and latency-sensitive customers need dedicated hardware resources with proximity hosting to the financial exchanges. This provides the potential of ultra-low latency connectivity to many market data providers and data centres. In conclusion, point to multi-point or multi-point to multi-point access and resiliency on a high-bandwidth network, results in a simple scalable and cost-effective solution for the demands of high-frequency trading.
Gold-i Integrates with CryptoCortex
Gold-i has integrated with CryptoCortex – an advanced digital asset trading platform from EPAM Systems, a leading global provider of digital platform engineering and development services. This provides financial institutions with increased access to multiple market makers and fully cleared cryptocurrency products available via Gold-i’s CryptoSwitch 2.0™, part of its Matrix multi-asset liquidity management platform.
The integration was completed following a request from a Gold-i client wanting to use the CryptoCortex platform to access liquidity from Hehmeyer and Shift Markets via Gold-i’s CryptoSwitch 2.0™.
Tom Higgins, CEO, Gold-i comments, “As digital asset trading continues to gain momentum amongst brokers, Prime of Primes and hedge funds, a key part of our strategy is to ensure that the cryptocurrency liquidity available through Gold-i’s liquidity management platform is easily accessible, regardless of which trading platform clients are using. CryptoCortex is one of the most advanced platforms for digital asset trading, therefore integrating with them was a logical step for Gold-i.”
“We are delighted to partner with Gold-i to provide our customers with real-time, event-driven processing and analytics that not only meets their essential needs but also delivers actionable intelligence,” said Ilya Gorelik, VP, Real-Time Computing Lab at EPAM. “Financial markets are among the fastest moving markets around, and with cutting edge tools – like CryptoCortex – that make data readily available, customers can quickly implement the best decisions possible.”
CryptoCortex is the most advanced institutional cryptocurrency trading platform on the market, providing a complete 360-degree solution for brokers/dealers, exchanges and buy-side trading firms. It has been developed by Deltix (now EPAM Systems), based on over 10 years’ experience in building, deploying and supporting institutional-grade intelligent trading across equities, futures, options, forex and fixed income.
Gold-i Matrix offers multiple routing and aggregation methods, leveraging connections with over 70 Liquidity Providers. It is super-fast and highly flexible, helping financial institutions worldwide to make more money and reduce risk. It supports FX, CFDs and cryptocurrencies in a single solution which is fully compatible with the Gold-i Crypto Switch. Crypto Switch™ 2.0, provides brokers worldwide with a fully cleared cryptocurrency product and a cost-effective, efficient means of accessing multiple cryptocurrency market makers who can provide deep pools of liquidity as a CFD or physical asset. For further information, visit www.gold-i.com.
5 Questions to Ask Yourself Before Trading Penny Stocks
Anyone and everyone from all corners of the world can trade from their comfort of their own as all that is needed is a computer and an internet connection.
Many people chose to trade complex asset classes like crude oil futures. But penny stock trading is preferred to many new traders because it is a lot easier to understand the stock market than the global oil market. Trading penny stocks is also cheaper to get started as some brokers have no minimum deposit requirement.
So how do you know if trading penny stocks is right for you? Here are five questions you need to ask yourself first.
1. Do You Have the Right Financial Motives?
Why exactly do you want to trade? If you want to trade to become a millionaire within a year or two despite little or no experience, trading most certainly is not right for you. Trading stocks involves risk but penny stocks could be even riskier.
Ask yourself if the money you want to risk trading penny stocks is needed for important expenses. Trading with rent money or your children’s education fund with the hopes of doubling is not the right mindset to have.
And forget about sustaining yourself with a guaranteed income at any point in your trading career. There is no magical number but you need enough money to cover at least six months’ worth of expenses while learning how to day trade.
But do you have a backup plan if your money runs out faster than expected? Can you call it quits earlier than expected and return to a regular job?
The appropriate and responsible path is to take a few months to learn how to properly and responsibly trade penny stocks. Learning the true ins and outs of penny stock trading strategies can unlock the potential for explosive returns.
2. Do You Have the Right Schedule?
Trading penny stocks for many people is a full-time job. But some people can get away with trading penny stocks as a hobby if they are available at only certain times of the day.
It is absolutely vital for penny stock traders to be alert and at their trading station at least an hour before the stock market opens. During the pre-market session, a trader is scanning the large universe of penny stocks to evaluate what stocks they will be buying and selling.
They might be looking at the news for a biotechnology company that released results from an encouraging clinical study trial. Or, they are looking for a company that announced a major contract win that would double or triple their sales.
So once 9:30 AM ET hits and the trading session official starts, a trader is well prepared.
But someone who is only available to trade penny stocks as of say 9:15 AM may not have enough time to prepare themselves for the fast action.
Similarly, traders that start their day in the afternoon session will miss out on many of the early movers and there is simply less opportunity from 12:00 PM to around 3:30 PM.
Part-time traders that start early enough can get away with ending their trading session before noon.
If you don’t have the right schedule due to work schedule, family obligations or you are in a different time zone, then penny stock trading during the off-hours might be a tedious task that offers little reward.
Source: Google Finance. (Ticker $MREO, daily chart from Dec. 18): This shows how early traders were able to capitalize on the strong gains and late traders missed out on a major surge.
3. Are You Motivated to Learn?
The day trading universe is open to anyone that wants to open an account and deposit money and no prior experience or knowledge is required.
But ask yourself first what do you really know about the stock market universe and how much are you willing to learn. Do you know how to read and understand Level 2 charts? Do you know the importance of SEC disclosures? What about evaluating what impact a poor earnings release will have on a stock’s movement.
It is OK not to know the answer to these dozens of other similar questions. But do you have the drive and dedication to learn from scratch? Do you have what it takes to read books and watch educational videos for weeks at a time? While this could be seen as an exciting process and an opportunity to learn a new skill, a lot of hard work and dedication is required to succeed.
4. Do You Know the Difference Between Trading And Gambling?
The general public shouldn’t be faulted for correlating trading penny stocks with gambling. They may have seen headlines about how the global COVID-19 pandemic prompted many bored sports bettors to find excitement and action in stocks.
But there is a fine line between trading penny stocks and gambling. Do you know the difference between the two? Gamblers will pick a penny stock — any penny stock and buy shares and simply hope for the best. They have no knowledge of what the company does, nor do they really care. They either make money on a trade or don’t.
Penny stock traders on the other hand have a strategy that has been developed, revised, and improved on over months if not years. They know how technical analysis can be used to determine an entry point, how to analyze volume trends, and where to get their news and information.
Perhaps more important, they know how vital it is to have an exit strategy as part of every trade and then to just move on.
Gamblers on the other hand love to double down when they are losing. If you are a gambler that is fine. Just be aware that the individual on the other side of your trade knows way more than you do about stocks and will be happy to take your money.
Which one are you? If you are a trader and know how to be disciplined and cautious then trading might be right for you.
Conclusion: Be Honest with Yourself
Trading penny stocks involves risk and many new traders fail. Checking off a bunch of answers from a checklist is useless and meaningless unless you are honest.
At the end of the day, only you can determine if trading penny stocks is truly the best move for you professionally. A broker certainly won’t be asking you these questions. It is not their responsibility to do so.
So be honest with yourself. If you really want to trade penny stocks but recognize now isn’t the ideal time for financial reasons or you have the wrong mindset there is nothing preventing you from giving it a shot in six months or a year.
This is a contributed article
Why the rise of retail FX is here to stay
By Michael Kamerman, CEO Skilling
2020 has been a tumultuous year for both the world and for financial markets. The events of this year have changed the very course of how we’ll live our future lives. Alongside the disruption of daily routines, the coronavirus disease has disrupted the global financial markets at systemic levels kicking in a global stock market crash in February this year. Sure, things look good now, but remember how you felt in early March?
The Coronavirus Crash had sent financial markets plunging into the fastest, most precipitous fall ever recorded in history and the most devastating since the Great Crash of 1929 – signalling in turn the beginning of a worldwide Covid-induced recession.
Certain industries have been hard-hit with many businesses unfortunately falling into insolvency. Many others are still fighting to survive the global lockdowns that threaten their existence. The new realities inflicted by the pandemic have also given rise to a new set of consumer needs and have as a result driven surges of interest in some sectors.
While the headwinds of Covid-19 have made this a chaotic year, the changing lifestyles of consumers have fueled the growth of other more fortunate industries. These include, for example, online retailers, home-delivery services, pharmaceuticals and biotech, video streaming services as well as… online trading. And a sector experiencing outsized growth in online trading is retail FX and CFD trading. Yes, the novel coronavirus pandemic has jolted foreign exchange and CFD trading because of bust-and-boom movements brought on by extreme volatility in fear-led markets.
Volatility is the Mother of Opportunity
When it comes to trading, volatility is the mother of opportunity. It has always been the case for trading speculative markets. This explains why the global FX market daily turnover hit $6.6 trillion earlier this year, with a 40% increase in day-to-day trading volume compared to the last decade.
Pre-Covid-19, the forex industry was relatively muted. Economic outlook was more certain, with relatively subdued market volatility, while a steady stream of traders were trickling into the market. As such, industry focus was on diversification and future-proofing business models.
Volatility, the likes of which we have experienced this year, feels like a once-in-a-lifetime occurrence, and one effect has been a surge in customer acquisition numbers in FX. With trading platforms having spent recent years optimising their online capabilities, the proliferation of people looking for innovative ways to capitalise on market movements and take control of their finances while under lockdown has, in a sense, been the ultimate proof of concept for the industry.
A continuation of this trend is very likely as countries across the world fight to keep the virus under control. Even with a vaccine on the horizon, record levels of government debt, high unemployment, and negative interest rates are creating a cocktail that is driving many people to seek greater financial independence, whether they are novices or experienced traders. Turning to the retail trading market in these circumstances can make for extraordinary tales, both in terms of wins and losses.
A rise in trading in pursuit of financial independence
Undoubtedly, the world has never spent more hours in front of screens as it has this year with the importance of online access to practically anything taking center stage. Simultaneously, personal finance has been high on people’s agendas, with the impact of the pandemic posing an existential threat to the income of millions of people.
This has driven greater appetite to participate in online trading, and the unpredictability of the 24-hours news cycle has created both confusion, and a sense of opportunity with aspiring traders.
In the wake of widespread redundancies and pay-cuts, people’s outlooks are shifting towards wanting to best monetise their time. This entry of new players into the market has happened in tandem with more experienced traders and investors sensing an opportunity to grow their own portfolios. Thus, one outcome of this year appears to be a shared desire from people to take a far more active role in protecting and growing their finances.
An era of more experienced traders
A positive outcome of this year’s situation is that new entrants have been those keen to study and learn about the markets. Indeed, the challenges that the world has faced this year are so unique, that from an economic perspective, they warrant examination, and are being used as a learning exercise.
Reliable and trustworthy brokers have provided a safe environment for traders to both test and develop their trading strategies. In doing so, traders have been able to grow their skills by learning how to navigate volatility and beginning to execute more substantial trades. Time spent on practice is increasingly more valuable to protect oneself against riskier and lesser-known market variations, particularly in the current climate.
The next six months aren’t likely to be a smooth ride. Volatility is set to continue, bringing with it greater trading volumes and greater opportunities for trader upskilling.
Good news lies ahead – for the world, and the world’s traders.
It is unfortunate that traders and investors stand to capitalise on higher returns during devastating situations that create heightened volatility, but this is the truth nonetheless and part of the essence of investing. The outlook of markets remains to be an indication of where the world is also headed. And that is not all bleak. The stock market bounced back relatively quickly in March, with share prices rising sharply even though many of the world’s developed economies were and are still suffering one of the worst recessions in living memory. Why? This is because, theoretically speaking, share prices are based on anticipated future expectations and income streams.
A most recent example is seen in Airbnb’s extraordinary IPO, making it one of the greatest success stories in the 2020 stock market. The success is clearly not based on Airbnb’s growth in revenue over the past year (when travel basically came to a complete halt). Investor demand was fueled by the hope and anticipation that pre-pandemic life will return and the global travel industry will be revived.
The overall global long-term outlook is a positive one, and the pandemic and associated recession is expected to give way to an economic recovery. What is for sure though is that the road to recovery is a long one, and market participants are to actively assess and reassess their investment and risk management strategies. The key to being in a better position to exploit the opportunities that arise in the markets is to be better able to mitigate the higher risk that comes with the unpredictable volatility of pandemic times.
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