Portware's buy-side strategy

Portware is a New York-based provider of multi-asset, automated and algorithmic trading software to the global securities marketplace. According to the vendor, it is the only wholly independent execution and order management trading systems provider, allowing it to supply traders with what it calls "true broker-neutral solutions" to facilitate best execution. Portware offers a customisable central trade portal to conduct a range of trading related activities; its product suite includes a trading platform for FX, single stock, portfolio, program, pairs and index trading coupled with a 'black-box' algorithmic engine, Portware Strategy Server.

Since Portware's launch in 2000, its technology has been implemented at more than 100 firms, including sell-side program trading desks, quantitative hedge funds and traditional asset management firms. The firm is headed up by Ary Khatchikian, president and chief technology officer, and Eric Goldberg, chief executive.

In addition to Portware's primary offerings in the algorithmic trading space, the firm also offers a set of tools tailored for a variety of asset classes and trading styles, as well as tools for transaction cost analysis (TCA), risk management and real-time reporting, and a combination of pre-packaged and third-party algorithms. The vendor also allows users to create proprietary algorithms to implement across any aspect of trade management or execution, from automated market-making, to hedging, crossing and full order-book management. These strategies can be executed by traders from within Portware's user interface or automated using Portware Strategy Server, an algorithmic engine for execution and order management.

Portware Strategy Server is an algorithmic engine designed specifically for high volume, high-frequency, automated order management, allowing users to create complex trading strategies and algorithms in order to automate all trading operations. Strategy Server is designed to process large numbers of orders and their associated message traffic, routing them via a Fix hub to any destination.

The product can operate as a stand alone black-box trading environment, or with client workstations running any number of Portware's graphical user interface (GUI) products, including Program Trading, FX Trading, and Pairs Trading. When used in conjunction with client workstations, traders are able to route orders to Strategy Server in order to access proprietary and third-party algorithms. In this scenario, the algorithm's parameters can be adjusted on-the-fly to respond to market conditions. Clients also have the option of using a third-party or proprietary system such as a historical or tick database in tandem with Strategy Server.

Strategy Server also includes a pluggable compliance module that allows users to implement compliance parameters, transform orders and apply custom validation through a central location, allowing users to develop algorithmic strategies more efficiently. Efficiencies can also be realised through Strategy Server's back-testing suite designed to play back weeks, months or years of historical market data, facilitating an algorithmic development process in which users can move efficiently from testing to production. Additionally, a customisable simulator allows clients to develop their own proprietary test cases.

Strategy Server is used primarily by high-frequency, quantitative hedge funds and sell-side program and algorithmic trading desks. Quant hedge funds use the application to build, test and run algorithmic trading strategies. Portware's dynamic messaging infrastructure allows these users to interact directly with the strategies to customise and manage them in real-time.

Sell-side firms use Strategy Server in a similar fashion, constructing, customising and managing their algorithmic operations. Strategy Server is also used as a platform to distribute sell-side strategies and services to clients on the buy side. According to Portware, traditional asset management firms are showing an increased interest in using the platform to build and run their own in-house, high-performance trading environment.

Portware Strategy Server is available for a flat, annual licensing fee. The firm's front-end GUI fees are structured on a per-user, per month basis. There are no transaction fees associated with any Portware product.

From a pure event engine perspective, the only competitive product to Portware's Strategy Server in the market today is Progress Software's Apama engine.

Strategy Server is designed to run on any operating system including Windows, Solaris, Red Hat and AIX. The product includes an open message infrastructure that allows for communication between workstations and Strategy Server. Additionally, Portware's multi-user mode allows all users to see all trades and activity happening through Strategy Server at any time.

Portware supports the following languages: Java, C, C++ and .Net. Clients using other languages also have access to Strategy Server's socket API. Because Portware is completely open, clients can access Strategy Server through messaging infrastructures such as Tibco, IBM MQSeries, Talarian, SmartSockets and other proprietary links.

For market data, Portware's Strategy Server is able to receive feeds from any third-party data vendor including Bloomberg, Reuters, Townsend, Comstock, Hyperfeed and Active Financial. In addition, the product supports load balancing of multiple feeds as well as development and customisation of propriety feeds that can be combined with third-party feeds and segmented per asset-class or any other parameter.

Clients can use Portware Strategy Server as a stand-alone, black box trading engine or can communicate with the Strategy Server through embedded controls in the Portware GUI (Graphical User Interface).

According to Debiche, Quantia Capital has been a Portware client since early in 2002 when he left the sell side and decided to set up the investment advisor. Portware's Strategy Server currently handles all of the investment manager's equity trade volumes. "We had always built our technology in house and I have to tell you that people like me are extremely wary of trusting anyone else to build their critical infrastructure," Debiche explains. "But I was willing to entertain that idea when I got in touch with the Portware group and I was very impressed with both sides – their technical infrastructure, and the fact that Eric [Goldberg, chief executive of Portware] came from the trading world and therefore ensured that the product was designed for traders and built by engineers, not designed by engineers without consulting users."

Debiche is clear how critical this (above mentioned) component is, especially given his assertion that very little software is designed by, with or for the people who are going to use it. "A lot of the users' considerations are not what the engineers are concerned about; they are interested in hard-core technology issues, but mundane issues like whether you can book your trades at the end of the day or deal with (trade) exceptions affect users all the time. Flexibility is essential. Do you get to impose your will on the system or does it impose its will on you?"

Debiche notes that performance was also a crucial factor leading to the Portware contract, where Quantia Capital required a platform to support moderately high frequency trading in a wide universe of stocks. "We're currently setting up to do even higher frequency trading, so we require extremely fast and reliable performance, particularly given the way the market is evolving in terms of message rates, segmentation into multiple venues, the need for buy-side organisations to optimise their routing and to respond to incoming data very quickly with low message latency."

Debiche says Quantia is looking at the possibility of collocating Strategy Server in a data centre with big 'pipes' from data feeds and back to the exchanges. "Using Portware allowed us to set up a high-performance equity trading desk very quickly in 2002. Strategy Server is an effective way of evolving to an even higher-performance system. Portware allows us to manage our incoming data as well as our order flow. It also tracks our positions in real time which is crucial because we are doing optimisation of various kinds in various places to balance our expected return against our risk as well as balance our transaction costs and market impact against market fluctuations."