Program Trading

Infofin has developed an automated order generation and post-trade monitoring software which allows users to choose from multiple pre-defined stored trading strategies.

Based on user defined parameters such as trading lot size, security, contract type, the entry and exit conditions, the system detects opportunities, orders are generated and sent to the Exchange via the Computer to computer link (CTCL) APIs. Each position is monitored in real-time and the system exits the positions when the exit condition is met. Informative reports with customisable alerts inform the user of changes to his portfolio intra-day.

• Most commonly used strategies are stored.
• Multiple strategies can run simultaneously.
• High level of performance and accuracy.
• Strategies work on arbitrage between exchanges and in derivatives
• User friendly interface
• Detailed reports, with real-time updates
• Post market MIS analysis
• Distributed architecture
• High bandwidth messaging library

A simple example of a strategy that can be automated is the cash and carry. The logic is fairly straightforward:

The software receives the broadcast of spot and futures prices of the security to be traded. If the bid price of the futures is greater than or equal to the ask price of the spot, the system places trades to buy spot at ask price and sell futures at bid price after checking whether the quantity available in spot is greater than or equal to the minimum lot of the futures. If the quantity of spot is less than the lot size, the system will not place orders and merely logs the event.

The system will not place fresh orders unless the entire quantity is traded. If trades on both segments are executed, if the system detects an opportunity to do an early unwind at predefined values after considering the above mentioned conditions on required quantity, the system places the orders to unwind. Once these two rounds are completed, the system stops and starts again on detecting the entry strategy.

Once the strategy is started, it monitors both the spot and derivatives markets for opportunities. On detecting an opportunity giving returns more than the required rate, the system places limit orders simultaneously both in the spot and futures markets. Once confirmations of both legs of trade are received, it constantly monitors for situations where there is an opportunity to unwind the trade at the expected exit rate of return. The strategy deployed focuses on exiting the arbitrage position in the same day without having to take delivery.

No short selling positions are taken by the system.

The strategy also has the logic built in which monitors the position of the index. If the index moves by 5\% in either direction, the system takes care not to place orders in the same direction.

Infofin has followed a distributed, component based approach in the design of the system. This allows the trading members to scale up gradually without having to invest heavily in hardware on day one.

Multiple strategies can be run on different machines which then pass on their orders to a central order routing interface. Logging of all the information is also centralised.