4thStory Adds Xenomorph Database

SAN FRANCISCO—Algorithmic trading software vendor 4thStory is integrating database technology from London-based Xenomorph to improve its capabilities for back-testing trading strategies using historical data, officials tell DWT.

Sell-side proprietary trading desks and other traders use 4thStory's software to develop, test and implement their algorithmic trading strategies for equities, futures, options, foreign exchange and fixed-income trading.

Steve Smith, CEO of 4thStory, says the two vendors started working together at the end of last year, and are currently in the process of integrating their technologies to offer "a full solution" to clients testing and running algo trading strategies.

He says that firms will be able to perform initial analysis using Xenomorph's TimeScape database, then import that data into 4thStory's 4S.Yellowstone application to run against a trader's proprietary strategies and perform more detailed analysis. To move a completed strategy into a live trading environment, users must select it as a strategy within 4thStory's integrated 4S.Everglades trading software, which has feed handlers to receive datafeeds from exchanges, and FIX connectivity for order execution.

Whether clients choose to use the software with direct exchange feeds or aggregated datafeeds depends on each client's preferences, says Smith. "Some are very sensitive and want direct feeds, while others are happy with an aggregator and don't want the overhead of managing exchange feeds," he says.

Smith says that integration and internal testing should be complete by the end of March, after which the vendor will look for early adopter clients to pilot test the combined solution. Full details of a formal commercial arrangement between the two have yet to be finalized, he says.

Xenomorph CEO Brian Sentance says the vendor's TimeScape database will provide a platform for storing and analyzing tick data underneath 4thStory's strategy testing and trading software, while also providing a data management structure and data cleansing capabilities.

"The benefit for 4thStory's clients is to improve on data quality and data transparency, and to increase the volume of tick data that can be used in conjunction with 4thStory products," Sentance says. "Put another way, the client can look for and back-test more trading opportunities across more data, and can be certain that the data being used to make these trading decisions is of high quality."

Smith says that 4thStory looked for a partner to provide a historical data repository rather than building one itself so that it could focus only on its software. "We're not a data repository or collector," he says. "Anyone can build anything. But what Xenomorph does is not our expertise or knowledge."

Seeking SQL

In other news, Xenomorph has completed a proof-of-concept project to integrate TimeScape into Microsoft SQL 2005 database technology, which would allow the vendor to provide the high-performance tick, time-series and complex data analysis of its proprietary technology within an industry-standard relational database that makes it easier for users to roll out, scale and cluster the technology.

"We can leverage all that so that end users see functional improvements that they might otherwise have had to wait many years for," as well as having access to other features of SQL, such as Microsoft's reporting services, Sentance says. "It saves us years of development time so that we can concentrate on adding value … and from a Microsoft point of view, it would give them financial markets capabilities."

Sentance says that Xenomorph tested the integrated version at the end of last year, producing performance equivalent to its own database. "On the technical side, it has been made possible by the use of Microsoft .Net inside SQL 2005, which means we have been able to expose our functionality as native SQL," he says.