Customisation and Adaptability, Dual Pillars of Effective Trading Systems

Trading systems have seen significant advancements over the years. Simple order execution tools have now evolved into sophisticated trading platforms and traders and fund managers find themselves adapting to such changes to stay ahead.

1. Today’s markets require one to adapt quickly and tailor trading tools and strategies to meet specific needs.
2. We are entering the age of highly customisable, rules-based trading systems.
3. TORA, an LSEG business, gives traders the ability to customise their trading operations and requirements.

In today’s fast-paced and ever-evolving financial markets, adaptability is key to staying ahead. More than ever, traders and fund managers demand reliable, high-quality, well-supported tools that give them the flexibility to design and implement their unique strategies effectively. According to a recent research report from Coalition Greenwich, 69% of buy-side traders cited ease of use, reliability and quality of technical support as the most important selection criteria for low-touch market access^[1]. We are now entering the age of highly customisable, rules-based trading systems that are redefining the way we interact with the markets.

Trading systems have witnessed significant advancements over the years. What began as simple order execution tools have now evolved into sophisticated platforms, integrating features such as customisable trading algorithms, rules-based order routing, and the ability to seamlessly incorporate specific trading models via application programming interfaces (APIs). Today’s platforms offer a degree of control that was previously unimaginable, allowing traders to mould the system according to their specific needs and trading preferences.

The most advanced order/execution management systems (OEMSs) offer extensive customisation and integration capabilities, allowing traders to create highly personalised, rules-based order routing methodologies, so that they can tailor their approach to suit specific strategies, criteria and conditions.

But this is only the tip of the iceberg. The power of customisation in modern trading systems extends beyond order execution and into the realm of data-driven trading. TORA’s platform, for instance, enables clients to access a wide range of market data indicators and analytics, including a wealth of data from Refinitiv. And with the power of open APIs, the possibilities for customisation are endless. Traders can now dig deep into the system’s capabilities, testing and deploying different models and parameters to create their unique trading environment.

When it comes to trading systems, the phrase ‘one size fits all’ rarely holds true. The unique nature of individual trading strategies and market dynamics necessitates systems that are adaptable and capable of extensive customisation. A vital aspect of this lies in rules-based order routing, a feature that has emerged as a game-changer in the world of trading technology.

Order routing is the journey of an order from the trader to the exchange. The efficiency and success of this journey can significantly influence the profitability of a trading strategy. Rules-based order routing elevates this process by enabling traders to establish specific parameters that guide where and how orders are executed, providing a high degree of control.

Within TORA, the sophistication of rules-based order routing lies in its granularity, which empowers traders to fine-tune their execution approach by defining rules based on factors such as trading strategy, venue, asset class, order size, market conditions, time of day, or various other criteria. To provide traders with the data they need to define these rules and understand which routes to use under which conditions, TORA uses powerful, real-time transaction cost analysis (TCA), which helps determine which type of algo to use (VWAP, TWAP, volume participation, etc.), how long to track the market, algo parameters (such as slice size, slice quantity, number of child orders, etc.), and smart order routing (SOR) policy in terms of how many and which liquidity types to use (e.g. lit venues, dark pools, brokers RFQs, etc.). This level of granularity allows traders to pro-actively respond to market dynamics, thereby improving the likelihood of optimal order execution.

Regarding how this works in practice, take the example of a trader at a ‘quantamental’ hedge fund, whose strategies may combine both quantitative and fundamental components. By incorporating real-time TCA data and assigning specific rules to cater for specific criteria (risk profile, or asset class, for example), such a trader could leverage rules-based order routing to ensure the optimal execution approach is followed. A systematic equity strategy may have rules defined for aggressively hitting bids or offers, whereas a fundamental-based strategy may prioritise the ability to execute large block orders over speed, in order to reduce market impact.

Another level of flexibility – and a key facet of TORA’s rules-based order routing functionality – is the ability of the system to rapidly adapt to market conditions. For example, if high volatility in the market is detected, or if liquidity dries up on a particular venue, the system could switch from one algorithm to another, either automatically or at the trader’s instigation. This ability to dynamically alter strategies, on-the-fly, ensures that order execution remains optimised, whatever the state of the market.

With order and execution management, high-quality market data plays an integral role in the decision-making processes. The integration of reliable, comprehensive and accurate real-time market data feeds into the trading system significantly enhances the efficacy of automated rule-based trading.

TORA is fully integrated with Refinitiv, the leading global provider of financial market data and infrastructure. This integration not only streamlines the trading process but also enriches the environment in which the trading rules operate, resulting in more informed, nuanced execution strategies. Real-time data feeds keep the system abreast of market fluctuations, enabling rapid responses to changing market conditions.

Moreover, the data provided by Refinitiv extends well beyond normalised price feeds across all markets. It encompasses comprehensive financial information, including detailed financial research, ESG scores, news updates, a wealth of analytics, and more. This wide-ranging data set can be used to inform and refine rule-based trading, enabling traders to consider a broader set of variables and conditions in their trading models and execution strategies, thus making those models and strategies a lot more powerful.

Application programming interfaces (APIs) are becoming an increasingly essential aspect of trading systems, not only for firms who run systematic or quantitative strategies, but right across the trading and investment spectrum. APIs serve as the conduits between software applications, allowing them to interact and share data and functionality. By leveraging the capabilities of these APIs, traders can further customise their trading operations, streamline their workflows, and potentially gain a competitive edge in the markets.

A well-designed suite of APIs can provide a plethora of features to enhance the trading experience. TORA offers robust APIs that enable clients to ingest and extract data from any part of the system, including market data (e.g., from trading venues, brokers or market data providers such as Refinitiv), inbound orders (e.g. from a systematic model, spreadsheet or front-end GUI), outbound/staged orders (to the market), trade executions, confirmations & allocations, position data, and parameters (e.g. for rule-based trading).

In addition to the above, TORA’s APIs facilitate the creation of custom reports and web pages with real-time data, and also allow for the seamless integration of a trader’s own models and algorithms with the trading platform, in order to enable the implementation of sophisticated, customised trading strategies.

For example, if a fund wants to automatically adjust its volume participation rates to reflect what is happening in the market, the API can ingest real-time market data and – based upon user-defined parameter – automatically adjust the order slices it is submitting to the markets (either using broker algos or DMA slices) to be more aggressive or passive, thus achieving optimal execution.

To fully unleash the potential of the API, TORA’s interactive implementation framework provides a sandbox environment that encourages experimentation before implementation. This includes coding samples that clients can use as a starting point, change to suit their needs, and test out in relevant scenarios before going to production.

TORA’s platform design is rooted in an open systems approach. This key design principle provides significant flexibility. The platform’s configuration allows portfolio managers – systematic or otherwise – to effortlessly incorporate data from both PMS and OEMS elements into their own models or trading workflows. Simultaneously, they can convey trading instructions to the market. Through TORA’s APIs, a fluid exchange of data is enabled, facilitating everything from the initial drive of alpha generation models to the complete management of the execution lifecycle.

Remaining competitive in today’s markets requires the ability to adapt quickly, and this often means tailoring trading tools and strategies to meet specific needs. TORA has stepped up to this challenge by offering robust features, data integration capabilities, and powerful APIs that give traders the freedom to customise their trading operations to their unique requirements.

TORA’s flexible order routing rules, coupled with the integration of valuable data from partners such as Refinitiv, empower traders to make more informed and intelligent trading decisions. Meanwhile, robust APIs facilitates seamless integration with clients’ own environments, opening a plethora of possibilities for customised, automated trading strategies.

Whether you’re seeking to optimise your trading performance, streamline your operations, or effectively manage your risk, TORA’s customisable features are designed to give you the edge.

[1] Globalization of Algorithmic Equity Trading: A Buy-Side View

The opinions expressed are those of the author(s) and do not necessarily reflect the views of London Stock Exchange Group plc (“LSEG”), its clients, or any of LSEG’s respective affiliates. Tora Trading Services LLC is registered with the SEC and a member of FINRA, SIPC, NFA. TORA Trading Services Limited is regulated by the HK SFC. This article is for general informational purposes only, should not be taken as any type of advice, and is intended for institutional customers and eligible counterparties, as defined by the respective regulators/authorities. Not all TORA services and related services are offered via the regulated entities. In addition, TORA services are not available in all jurisdictions.