Steffen Gemuenden is one of the founders of RTS Realtime Systems (RTS). MarketsWiki’s Jessica Titlebaum sat down with Gemuenden after the release of the RTS product RTD Tango Trader to discuss how Gemuenden got into the business, how market needs have changed and who is leading the electronic revolution.
Q. How did you get into this business?
A. In 1989, about six months before the launch of the DTB (Deutsche Termin Boerse, the predecessor of Eurex), I started to work for a privately held bank in Frankfurt. It was around the time that German banks and brokerage companies were setting up their first electronic trading networks and Morgan Stanley had opened their trading branch in Frankfurt. Between 1989 and 1992, I started developing software on the banking side, then for proprietary trading and then on a joint venture with an options market-making firm.
In February 1992, we had the idea to develop a multi-asset, multi-exchange platform. DTB was the first exchange to which we connected. We also integrated what was then the German Stock Market, now Xetra –IBIS, which was based on the IBM mainframe system. We were one of the first firms to integrate equities and derivatives into one single front-end system.
Q. What were the needs of the customers in 1992?
A. It was always speed and automation, but speed was defined differently back then. What we called ‘real time’ in 1992 was the market updating every four seconds and order roundtrip times at one second. This was considered fast compared to trading hedge orders on the floor.
We built systems for options market making, proprietary trading, and brokerage; but what customers really requested was to calculate their options theoreticals with real-time feeds. One of the first things we did was to develop the price feed for the equity markets to enable traders to calculate options theoreticals in real-time.
Q. What were the challenges that your customers faced back then?
A. Our customers wanted to integrate different markets such as equity options and futures. They also wanted to integrate margining and back-office systems. Straight Thru Processing (STP) was also a frequent challenge for our customers back then.
Q. How has that changed, and what are the challenges now in 2010?
A. Our customers face similar challenges, such as performance, stability, connectivity and time-to-market but on a bigger scale. We aren’t talking about the integration of the equity, futures and options markets in one country; it has become a completely global game. As a vendor, it is a challenge to keep up with connectivity to new exchanges, frequent exchange upgrades and to satisfy our customer demand for faster systems.
Q. What were some of the challenges that you saw when going electronic?
A. The main challenge was the move from the floor to the screen. The move was inevitable, however, because the competition was growing too large and too quick.
Whereas Europe was the driving force in the 90’s the US has been driving innovation in the electronic markets for the past decade. The developments in the equity and futures markets speak for themselves. I think it started with the ECN model in the U.S. before it moved into the derivatives market. These platforms revolutionized (equity) trading.
Q. Your flagship product is RTD Tango. You recently released an extension of that product, RTD Tango Trader. How does this product solve some of the current market challenges?
A. RTD Tango is an algorithmic toolbox to rapidly code, test – and deploy algorithms via our order management system. It is Java-based and lightweight. For RTD Tango Trader, we combined the benefits of algorithmic trading and click trading. It is based on the RTD Tango back-end technology so firms can leverage their existing infrastructure. With the new solution, market participants can develop their own proprietary algos; TWAP, VWAP, SOR, spreads and make them available to their traders or customers over the Internet or their trading rooms. Strategy development can be done in the background and can be published in real-time to the RTD Tango Trader once they are ready. Traders control their active algo- AND regular orders in one screen, while still being able to manually hedge / click trade from the same window.
Q. What are your risk management procedures?
A. We started early on to put pre-execution limit controls into our applications. Our clients are now capable of pre-execution limit management in sub milliseconds and benefit from system integrations with back-office and clearing systems. We reconcile our positions and account balances with all different kinds of clearing systems.
Q. What was a business mistake or career challenge that you learned from?
A. One of the most important things we learned as a Germany-based company growing globally is that you can’t apply the European way of doing business to the U.S. or Asia. You have to take into consideration the country’s culture, how they work with exchanges, how people do business, how you develop partnerships. You can’t apply your local business model in a different continent and that is one of the biggest things we have learned. However, I don’t think backwards – it is important to always look forward, especially in such a dynamic and fast paced industry.