Impact of Brexit and Recent Market Events on Algorithmic Trading - 19 July 2016

QuantInstiNitesh KhandelwalJuly 19, 2016

Algorithmic Trading & Recent Market Events

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Market EventAnything significant that can impact the markets in terms of price movement or market microstructure

Planned Events with Unknown Outcome

Unplanned Events

Planned Events with Known Outcome

Volatility: Extremely HighProfit Potential: HighDisruption: High

Price Volatility: High to Extremely HighProfit Potential: Extremely HighDisruption: Limited

Volatility: LowProfit Potential: LowDisruption: Limited

The Swans

BREXIT $ 2 trillion wiped out

GBP crashed by 10%

Margin requirements shot up

STT Hike

SNB

SNB Removes Peg with Euro

1 2 3 4 50

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100000120000140000160000180000

May-16Jun-16

STT increased from 0.017% to 0.05% from Jun 2016

Day of RBI Policy Announcement

Daily Nifty Options Volume

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Impact on HFT

Source: http://blogs.wsj.com/moneybeat/2016/06/24/virtu-shares-rise-as-trading-volume-soars-on-brexit-fears/

BREXIT

It wasn’t the STT hike but the fall in volume it led to, that hurt HFT and other market participants temporarily

Source: http://www.efinancialnews.com/story/2015-01-22/high-speed-firms-profit-from-swiss-franc-move

SNB

http://m.dailyhunt.in/news/india/english/business-standard-epaper-bizzstand/stt-hike-on-options-to-pinch-high-volume-traders-newsid-53872418

STT

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BREXIT Impact• FX volumes multiplied on June 23-24• Significant activity over the whole month• Planned event Liquidity didn’t dry up totally• Participation from Banks & Non-banks alike• Liquidity ensure smooth transition unlike SNB

event

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What helps HFT makes money?

VOLUMES

VOLATILITY

MARKET MAKING

ARBITRAGE

ML/DIRECTIONAL

MR NEWS/Sentiment

Low Volatility: Bid Ask Spread

High Volatility: Multi Exch/Asset, Lead/Lag

Volatility: Results in disparity

Volume: Opportunities

Multiple Trades

Tick based decisions

Early Reaction

Unplanned Events: Extra Bonus

FACTORS STRATEGY LOGIC

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No Free Lunches

Where else?• Colo/Datacenters• Trading Lines• Inter Destination lines• Technology Development• Hardware• Salaries

• Reasonable gestation period between infra/tech investment & returns• Technology disruption• Business Environment Changes

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Skill Sets Overview

Number Crunching &

Patterns Mathematical & Statistical

Understanding

ConnectionsUnderstanding of Technology

& Market Microstructure

Typing Speed!

Financial Computing & Infrastructure

Financial markets

understanding Financial Markets

Understanding

Conventional Trading Success Recipe

Algorithmic Trading Success Recipe

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What is EPATTM

Executive Programme in Algorithmic Trading• 6-months long online programme • 100 hours of live interactive lectures• 200 hours of additional course work • Live industry project under mentorship of practitioners• Industry experts and professionals as teaching faculty• A pool of more than a dozen faculty members including Dr. Ernest Chan,

Rajib Ranjan Borah, Dr. Yves Hilpisch • 24/7 access to content through new age online learning portal (LMS)• Dedicated support team for quick query resolution

EPATTM Curriculum

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EPATTM Modules

Module 1: PRIMER

Module 2: INTRODUCTION

Module 3: STATISTICS with EXCEL

Module 4: OPTIONS, DERIVATIVES and RISK

Module 5: ADVANCED STATISTICS with R

Module 6: QUANTITATIVE TRADING STRATEGIES

Module 7: BUSINESS ENVIRONMENT

Module 8: ALGORITHMIC TRADING PLATFORM

Module 9: PROJECT/Final Exam

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Opportunities

Distribution of current openings at QuantInsti Placement Cell currently.

Research Analyst12%

Equity Sales6%

JavaProgrammer5%

LFT/HFT11%

Quant Analyst17%

Quant Developer/Programmer9%

Quant / Algo Trader

6%

Algo Product Head2%

Head Algo Risk2%

Derivative/Equity Trader

3%

Advisory6%

Strategy De-veloper

2%

Senior Manager: Product Devel-

opment and Maintenance

2%

Others 17%

Trading Strategist2%

Job Openings

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EPAT Alumni

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EPAT Alumni

Thank You Merci Danke Gracias Arigato Asante

Grazi Shukriya

[email protected] / +91 – 9920 – 44 - 88 – 77 / +65 – 9057– 8301

Go Algo! Join QI’s EPATTM (Executive Programme on Algorithmic Trading)Visit: www.quantinsti.com for more information.

Question & Answers

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