OptionsCity on Monday announced the release of Metro 5.0, the most recent update to its flagship trading and market-making platform.
Last week OptionsCity’s president and CEO Hazem Dawani spoke with JLN’s Sarah Rudolph on the new version of Metro and what’s going on in technology in the options industry.
Q: OptionsCity just rolled out a new version of its Metro trading system. Can you tell me how it has changed to accommodate the changing needs in the marketplace?
A: Version 5.0 is the result of a lot of work in the past 6-9 months. We worked on enhancing multiple areas. There is more emphasis on risk management: we have added a risk tool designed for global risk managers who manage multiple trading desks across many geographic areas. It allows them to view the different components of risk.
But the most significant achievement in version 5.0 is introducing some major performance enhancements that allow the application to process a much large number of messages so there is larger throughput in times that are threefold faster than in the previous version of Metro. We spent a lot of time on that innovation.
We also introduced new pricing models, including a hybrid between the traditional Whaley and the Ju Zhong pricing models. It was introduced in order to price options with an expiration years down the road, and it takes into consideration some statistics involving changes in the global market over time. It can be used to price both short term and long term options.
The new pricing model is also a function of the expansion of our customer base into new products as well as our expansion into energy, especially on the over-the-counter side. OTC energy traders need to price options that expire in 2017 and 2018. The new model was developed with a specific focus on pricing this type of option better for our customers who are energy producers and buy-side firms.
Another thing we’ve done is integrated Excel more fully into our system. We found new ways to display RFQs coming in from exchanges. Our customers’ trading strategies often revolve around RFQs, so we introduced new ways to allow our customers to better sort and display them.
Brokers are a new type of customer for us, and to focus on them we introduced functionality to manage the large number of trading accounts they deal with and cross trades on the exchange.
Q: Is speed the most important technology advantage a firm needs to compete these days?
A: While speed is not a strategy by itself anymore, so being the fastest is not a strategy by itself. However, it is still critical to our customers, so we are constantly trying to improve. The theme we hear is, if your only distinctive advantage is speed, you don’t really have a good strategy. Speed is only one component.
You also need the ability to produce your ideas into the market quickly — to create new trading strategies, test them quickly, and deploy them. The cycle from idea creation to deployment is critical to our customers, because they must constantly adapt their strategies to the trading environment.
Q: What is the difference between Metro and Freeway?
A: Metro is an out-of-the-box platform with a user interface that gives you tools to price options, manage risk, make markets or execute electronically. Freeway is our automated trading engine that sits in this ecosystem and works with Metro. We recently launched Freeway Analytics to give customers the ability to back test their ideas, analyze them thoroughly, and be able to generate new ideas and deploy them quickly and seamlessly in Freeway. That is a critical need today.
The more advanced users use Freeway, firms that have developmental resources and would like to build their own trading strategies programmatically.
Q: What is currently the biggest technology challenge for firms and exchanges?
A: Just keeping up with the changing industry. There has been such a big transformation in the industry – new products coming out, speed requirements getting faster and faster, and more message traffic. There are also compliance challenges coming up. You have to be one step ahead or you’ll be outdated.
Q: OptionsCity was recently given the “Markets Choice” award for the best options software by Markets Media. What is distinctive about your software that sets it apart from others’?
A: We focus on innovation and constantly improving our customer experience. We have one of the highest levels of customer satisfaction, because we listen to our customers and work hard to service them and provide them with the latest technology. Metro 5.0 is the latest example of that.
We also built a global hosting infrastructure along with colocation services. That includes cabinets and data centers in five different cities with interconnectivity between them all. It allows us to provide a one stop shop with access to the various exchanges, including global houses. It covers Chicago, Aurora (IL), New York, London and Frankfurt. We hope to go to Asia next.
Q: What are the biggest trends you see coming up in the industry?
A: More globalization, more demand for access from the U.S. to European exchanges and vice versa. We are seeing more of that, especially as exchanges are merging and moving products from one exchange to another and offering competing products.