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Front Runner

VIEWS: 12 PAGES: 31

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									 Front Runner
 Agile Trading Platform




challenge conventional wisdom - beat the smart money!

                            Overview
                           November, 2008


                          www.front-run.com
                            proprietary & confidential
Front Runner - Agenda

    Positioning and value proposition
    Key elements
    Technology platform implications
    Feature set and internals
    Summary information




                    www.front-run.com              2
                      proprietary & confidential
Front Runner - Agenda

    Positioning and value proposition
    Key elements
    Technology platform implications
    Feature set and internals
    Summary information




                    www.front-run.com              3
                      proprietary & confidential
The Truth Well Told
 The smart money leads/moves the markets
 Alignment with the smart money is critical to
  your success
 Technological, market and regulatory
  changes increase trading transparency
 Digital forensics can be used to follow the
  bread crumb trail of the smart money
 Advanced information technology can help
  you beat the smart money at their own game

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What is Front Runner ?
   An agile trading platform designed to help you
    preempt or front run the smart money in the
    markets and tally outsized-gains
   Incorporates advanced information technology
       digital forensics
       complex event processing
       algorithmic and program trading (APT)
       intelligent agents

   Targeted to the innovative and tech-savvy
    segment of the trading community


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Core Functional Capabilities

 1. Observe
 2. Rationalize
 3. Exploit


Front Runner seamlessly integrates advanced information technology
components across three basic functions focused on the activity of
the smart money in the markets.




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Front Runner - Agenda

    Positioning and value proposition
    Key elements
    Technology platform implications
    Feature set and internals
    Summary information




                    www.front-run.com              7
                      proprietary & confidential
Key Elements of Front Runner



Trade Stream ForensicsTM   Smart Money ProfilerTM             Algo & Program Trading



      1 - observe            2 - rationalize                  3 - exploit




                       “I came, I saw, I conquered”
                       -Caesar




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                                 proprietary & confidential
Key Elements of Front Runner



Trade Stream ForensicsTM   Smart Money ProfilerTM          Algo & Program Trading



      1 - observe           2 - rationalize                3 - exploit




Trade Stream ForensicsTM is a sophisticated data mining tool that allows
you to electronically capture the trading activity of the smart money.



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    Trade Stream Forensics                                   TM

                                                      11010001011011101   011001 01010010110
                                                                          011001
   Application of science and information
    technology to the investigation of trading activity
    across the financial markets
   Compilation of a body of evidence leading to a
    profile of the trader and likely trading strategy
   Used in the aggregate to pinpoint what the
    smart money is doing in the market
   Projected impact of the smart money provides
    you a road sign to the right side of the market
                       www.front-run.com                                                 10
                         proprietary & confidential
Key Elements of Front Runner



Trade Stream ForensicsTM   Smart Money ProfilerTM          Algo & Program Trading



      1 - observe           2 - rationalize                3 - exploit




Smart Money ProfilerTM is a powerful analytical tool that helps you make
sense of what the smart money is doing in the markets.



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                              proprietary & confidential
Smart Money Profiler                                TM




   Evaluates trading activity by the smart money
    to identify trader goals and objectives
   Pattern matching and game theory concepts
    are used to enumerate the trading strategy
   Back testing is used to verify consistency of
    the strategy with the goals and objectives
   Game plan is recommended to exploit the
    impact of the smart money on the markets

                     www.front-run.com                   12
                       proprietary & confidential
Key Elements of Front Runner



Trade Stream ForensicsTM   Smart Money ProfilerTM          Algo & Program Trading



      1 - observe           2 - rationalize                3 - exploit




Algorithmic and Program Trading (APT) capabilities allow you to
leverage sophisticated trading techniques to trump the smart money.



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                              proprietary & confidential
Algorithmic & Program Trading (APT)
   Traditionally separate concepts merged under
    progressive e-trading strategies
       program trading – automated trading of a basket of
        securities via computer to computer interaction
       algorithmic trading – use of sophisticated
        mathematical models to identify and manage trades
   Program trading defines the “what”
   Algorithmic trading optimizes “when”, “where”
    and “how”
   Program trading is relatively mature, while
    algorithmic trading is a more recent trend
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APT Embraced by the “Smart Money”

       Hedge funds
       Institutional investors
       Asset managers
       Broker/dealers

Technological advances along with market and regulatory changes
have lowered the barriers to entry, extending the APT opportunity to a
much broader market than the smart money!



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Program Trading
   Computerized trading of a basket of securities
       automated
                                                           IBM
       simultaneous                                  PG
                                                            GE

       machine to machine via APIs                   AA




   AKA “portfolio trading”
   Emphasizes the scope of the trade in terms of
    the specific instruments (i.e., the “what”)
   Routinely accounts for more than 50% of the
    daily volume on NYSE

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                         proprietary & confidential
Program Trading by the Smart Money




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Program Trading Examples
   Arbitrage – take advantage of price
    discrepancies between different markets
       buy program – e.g., buy the composite stocks in the SPX and
        short the spoos
       sell program – e.g., buy the spoos and short the composite stocks
        in the SPX

   Portfolio restructuring – keep the strategy but
    change the holdings
       new manager puts own imprint on the fund (e.g.,Magellan Fund)
       sector shifts (e.g., dump emerging markets for value plays)

   Asset allocation
       rebalance/change asset classes (stocks, bonds, derivatives, forex)


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                                proprietary & confidential
Program Trading Trends
   Support for basket trades across variety of
    asset classes
       equities
       derivatives (futures, options)
       fixed income
       forex
       other

   Algo trading techniques applied at the basket
    level, as well as on the individual instruments

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Algorithmic Trading
   Use of mathematical models to manage
    the “when”, “where” and “how” of trading
       decomposition
       order types
       pricing
       timing
       venues

   Slice and dice the order
       minimize market impact
       lower trading costs
       improve trader productivity
       preserve anonymity
       enhance risk control

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Algorithmic Trading on the Increase




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Algorithmic Trading Examples
   Volume-weighted average price (VWAP)
   Arrival price
   Time-weighted average price (TWAP)
   Implementation shortfall
   Percent of volume (POV)
   Guerilla
   PEG
   Liquidity forecast

                  www.front-run.com              22
                    proprietary & confidential
    Algorithmic Trading Trends
   Increase in white box algorithms customized to
    the user over more rigid black box algorithms
   Pre-trade analytics to gauge risk/return before
    the trade is executed
   Transaction cost analysis (TCA) to measure
    performance of trading activity to benchmarks
   Proactive identification of trade opportunities
   Next gen algorithms that forecast and react to
    the market, and adapt through the trade lifecycle

                       www.front-run.com              23
                         proprietary & confidential
Front Runner - Agenda

    Positioning and value proposition
    Key elements
    Technology platform implications
    Feature set and internals
    Summary information




                    www.front-run.com              24
                      proprietary & confidential
Technology Platform Implications
   Hybrid system capabilities
       data mining and decision support
       mathematical modeling
       transaction management

   Strenuous performance requirements
       real-time
       near-zero latency
       massive data volumes
   Lots of integration points
       markets
       data and news feeds
       trading networks

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Advanced Technology Components

   Data mining
   Complex event processing
   Intelligent agents
   Message oriented middleware
   SOA/EDA hybrid architecture




                  www.front-run.com              26
                    proprietary & confidential
Front Runner - Agenda

    Positioning and value proposition
    Key elements
    Technology platform implications
    Feature set and internals
    Summary information




                    www.front-run.com              27
                      proprietary & confidential
      Front Runner Internals
               ECN    crossing      ATS




                         trade stream                                             Trade Stream
                                                                                   ForensicsTM

      NYSE   NASDAQ   CME        CBOT     NIKKEI     FTSE



                                                                    trader info      smart money
                              trading
                                                                                       tick data
                             scenarios


              NYSE



                      algo & program                                       Smart Money             historical
CME




             orders                            strategy                                              data
                          trading                                           ProfilerTM

              ECN



                                            www.front-run.com                                             28
                                              proprietary & confidential
Front Runner - Agenda

    Positioning and value proposition
    Key elements
    Technology platform implications
    Feature set and internals
    Summary information




                    www.front-run.com              29
                      proprietary & confidential
Summary information

   web site: www.front-run.com
   q&a: info@front-run.com
   white papers: www.front-run.com/documents.html




                     www.front-run.com              30
                       proprietary & confidential
 Front Runner
 Agile Trading Platform




challenge conventional wisdom - beat the smart money!




                          www.front-run.com
                            proprietary & confidential

								
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