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William Goodbody headshot

Bill Goodbody,
BATS Global Markets

Since completing its acquisition of Hotspot institutional foreign-exchange (FX) market earlier this month, BATS Global Markets officials have not let the grass grow under their feet.

The global exchange operator plans to deploy an instance of its Hotspot matching engine in its Slough facilities later this year.

“We plan to move swiftly with this project to meet the demand from European customers,” said Bill Goodbody, senior vice president, foreign exchange at BATS.

The new matching engine will target the currencies that dominate trading during European and Asian market hours while the original matching engine, which is based in northern New Jersey, will continue to support the North American FX market.

BATS has no immediate plans to deploy a third instance of the Hotspot matching engine specifically for the Asian markets.

“We’re focussing on getting Europe really motoring, and then we’ll look to other regions,” said a BATS spokesperson.

BATS first announced its planned $365 million acquisition of Hotspot from KCG Holdings on January 28 and completed the deal on March 13.

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Author Khaled Aly argues that hardware-based decimal-floating-point arithmetic (DFPA) offerings deliver better FPGA performance for low-latency trading than native binary floating-point arithmetic or software-based DFPA.

Via EE Times.

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Start-up electronic fixed-income trading venue operator Electronifie plans a novel way to bring liquidity to its order-driven market for US corporate bonds, which should launch sometime this quarter.

The vendor’s all-to-all platform consists of a displayed limit-order book and a separate non-displayed mid-point match venue for large-block trades in the 1,500 to 1,700 most liquid CUSIPs from the 300 largest distinct issuers, according to company officials.

Electronifie’s limit-order book will display live executable orders from un-named designated market makers ranging from the $200,000-minimum order size to more than $1 million, officials expect.

Of the three designated market markers already signed by the start-up, “one is bulge-bracket dealer; another has electronic-trading encoded in its DNA; and the third is boutique dealer,” says a spokesperson.

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Traders magazine has published a short piece on whether brokerages could meet the 50-millisecond drift window for their server clocks proposed by FINRA.

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Okay, this post’s title is a little misleading. I doubt that any trader would to apply the standard high-frequency trading strategy, which constantly pennies orders throughout the day but does not leave any open positions at the end of the day, when it comes to over-the-counter (OTC) swaps trading.

What has garnered my attention is the Commodity Futures Trading Commission’s (CFTC) trade reporting embargo rule that prevents swaps execution facilities (SEFs) from sharing recently executed trade details with other SEF participants before the SEF’s system releases the trade details to a swaps data repository (SDR).

Such a set up is going to lead to an unholy mess once dealers and non-dealers begin trading on SEFs. It is going to lead to a replay of flash-order headache that happened in the equities market a few years ago.

Yes, I know that the two markets aren’t carbon copies of each other. However, this embargo market data embargo will create a bifurcated market data model consisting of participants taking their feed directly from the SEF and those who will rely on data aggregator or SDR feeds.

According to a few well-placed industry sources, they expect SDRs to operate at the same pace as FINRA’s TRACE reporting platform. That might be fine for manual voice trading, but not when SEF matching engines run at millisecond speeds.

I can see both sides of the argument. Given the very illiquid nature of the OTC swaps market, flashing prices of recent trades helps provide additional liquidity. Yet, to take advantage of it, a market participant will need a direct link to the SEF. That’s an expensive proposition as more and more SEF operators come out of the woodwork.

Large dealers may be able to take on those additional market data costs given the large trade volumes they execute, non-dealers likely will balk at the situation.

In the equities market, all of the exchanges decided to retire their flash orders before the Securities and Exchange Commission (SEC) needed to make an official ruling on the order type. I do not think the CFTC will have the same luxury.

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