Alphacet, Inc., a developer of innovative software solutions for quantitative analysts, portfolio managers and traders, today announced that a tier-one hedge fund client has selected Alphacet and Knight, a global financial services firm that provides market access and trade execution services, to deploy a comprehensive workflow for algorithmic pairs trading.
This workflow is an out-of-the-box solution for firms looking to develop, backtest, paper trade and deploy large algorithmic pairs trading strategies. To create this workflow, Alphacet and Knight have integrated their cutting edge technologies so users can deploy pairs trading strategies of significant size. Alphacet and Knightâs fully automated workflow increases efficiency and addresses compliance concerns by reducing the likelihood of human errors.
âAs more firms look to automate old legacy processes that utilize inflexible and error-prone technologies, there is an increasing need for solutions that allow large funds to easily create, test and deploy large market neutral strategies,â said Peter Sibirzeff, chief executive officer of Alphacet. âBy teaming with Knight, we now can offer our users a complete, seamless pairs trading workflow that allows funds to eliminate lengthy and costly internal IT projects and focus on true alpha generation as a turn-key solution.â
Alphacetâs new pairs trading functionality is the latest addition to Discovery, the only off-the-shelf, straight through processing alpha generation platform on the market. With Discovery, users can develop, backtest, paper trade and launch strategies seamlessly from one unified platform to reduce strategy development time by up to a factor of five.
âBy combining Knightâs leading pairs trading and execution capabilities with Discoveryâs award-winning strategy development platform, traders can now shorten time to market and focus on generating robust alpha models through one FIX connection,â said Joseph Wald, managing director at Knight. âThis partnership will allow traders to avoid the common pitfalls of algorithmic pairs trading by allowing users to create and modify strategies instantly, while also locating disparate liquidity quickly and anonymously.â
In this workflow, traders manage very large investment universes, as well as develop and test advanced pairs trading strategies within Discovery. Knight provides a test environment, with market prices and order books that mirror the real market, allowing users to perform extensive paper trading before deployment.
After a strategy is vetted, users can generate parent/child orders that are sent via FIX to Knightâs pairs trading suite and FAN, Knightâs innovative aggregation technology that sweeps and posts orders simultaneously in displayed and dark markets. As orders are filled, results are fed back into Discovery via a real-time feedback loop that includes order state to support advanced strategy logic for managing trades automatically. This also provides automated end-of-day back office reconciliation with central position-keeping systems.
Alphacet was awarded the Best Buy-Side Newcomer in 2009 by Buy-Side Technology. In addition, Discovery received top ratings from the Aite Group in its 2008 âThe World According to Quantsâ report and was nominated as a finalist for The Technical Analystâs Best Automated Trading Product award in 2009 and 2010.
Knightâs algorithmic suite is offered through Knight Direct LLC and Knight Equity Markets, L.P., members FINRA & SIPC and subsidiaries of Knight Capital Group.