JLN spoke with Annabelle Baldwin, the chief revenue officer of Spider Rock, a Chicago-based proprietary trading firm, at the OIC Conference in Nashville. She spoke about how the company is building the next generation of trading tools as well as a new options platform to serve a broader set of institutional clients.
Baldwin said Spider Rock has become the de facto execution platform for quantitative, systematic hedge funds who are very active in trading broad options strategies. “There are a few hundred of these guys, not thousands, so it’s a sliver of the institutional clients that do trade options. We’ve been working for the past couple of years toward building the next generation of tools, the next options platform, to service a broader set of institutional clients,” she said.
The company is about to release a new block trading tool in the coming weeks. “We’re trying to automate a lot of what the true users of the market are doing when they trade options, which is block trading,” she said.
Spider Rock is also filing to become an ATS and intends to find both sides of the order to match and bring those two-sided orders to cross on an exchange, she said. It is really becoming a trading network for the option institutional crowd, where large orders can match ahead of an exchange, she said.
Other companies are doing similar things, she added, but the novelty for Spider Rock is that the company is going to push the front end platform to the institutional crowd.
The company brought her in in 2010, intending perhaps to pivot away from prop trading but offer a commercial trading platform, Baldwin said. “I did a lot of listening to (Founder) George (Papas)’s concepts, which were really novel, particularly in terms of execution: Machine learning, understanding where the surface is drifting on a short time scale….all these market making-ish techniques were unheard of as part of a commercial trading system,” she said.
Spider Rock has just shy of 1,000 people leveraging its platform, representing about 100 firms, Baldwin said. It also has a market data company called Spider Rock Gateway Technologies. To power the trading system, it takes in live data feeds directly from the source and computes analytics – Greeks and volatility surfaces and in flight volatility. Now it’s repackaging those Greeks into feeds that it can broadcast to clients that are interested in option analytics. “That’s a growing business as well,” she said.
We asked how Spider Rock’s clients reacted to the 0DTE trading phenomenon.
“We pick up any real products that come online,” she said. “We don’t advertise a new product, it’s just available on the Spider Rock system. We do see the massive adoption of weeklys, but the 0DTE product, which is intriguing, I think we’ll leverage it mostly as a hedging vehicle,” she said. She added that there is a lot of retail interest in 0DTE, but on the institutional side it’s “mostly a cheap product to use for gamma hedging.”
The company has also been hard at work to extend the product scope of its trading system, and the executions it has deployed to trade equity options are now available for options on futures, she said. “We are connected to the CME and Cboe for futures on the VIX. All these execution techniques and algorithms are being offered as well for options on futures.”
The block trading platform Spider Rock is releasing will support futures in Europe and Asia, and will likely extend to other regions around the world two years or so down the road, she said.
The company is also launching a concierge desk in New York City “to really prime the pump”; to transitional institutional clients that are used to calling a broker to find the other side of a large block order, she said. There will be a few brokers on a concierge desk in NYC to transition from high touch to automated low-touch workflows. “It’s new to us but part of the evolution of our ecosystem,” she added.
Questions we asked Annabelle Baldwin:
What’s new at SpiderRock?
What was the first product SpiderRock launched and what’s it look like today?
How have your clients reacted to the 0DTE trading phenomenon?
Options on Futures?