Sigma Eyes New Assets with TimeScape

16 May 2011

Montreal-based proprietary trading firm Sigma Capital Trading recently deployed data management technology vendor Xenomorph's TimeScape database and analytics product—initially to support the development of futures and options spread strategies, though the firm is now considering expanding TimeScape to support equities trading as well.

Sigma Capital began using TimeScape to support trading of VIX futures and options on the Chicago Board Options Exchange’s CBOE Futures Exchange in March, following six months of testing the system and working with the vendor to develop the custom-built TimeScape Spreads Application on top of the TimeScape database.

The time savings achieved by using TimeScape has allowed Sigma Capital to explore more potentially profitable areas of trading, and to use TimeScape to explore strategies for trading equities—particularly opportunities resulting from increased stock price volatility on the last day of trading before a scheduled earnings call.

Sigma Capital uses the TimeScape Spreads Application to compute calendar spreads and term structures, which involves calculation-intensive mathematical models, while also using TimeScape to import, store and process the firm’s large volumes of futures and options data, including real-time data from Interactive Brokers and four years of historical options data from Nexa Technologies’ Tick Data division.

Previously, Sigma Capital relied on Microsoft Excel to run its back-testing, a manual process which would involve calculating the performance of each leg in a strategy for each month individually over a given time interval, before being able to view the resulting spread in charting and automated trading software MultiCharts. This process could take weeks, says Remy Belanger, partner at Sigma Capital. “Then, if I wanted to change the ratio of one leg to another, to see what edge that would give me, I would have to go back and do all the calculations over again,” he adds.

The Spreads Application speeds up this process by enabling the firm to enter all legs of a strategy at once and run all the calculations in a single process, to provide it with the four-year performance of a strategy in a matter of minutes, says Robert Hackman, consultant at Xenomorph.

The Spreads Application automatically captures all the necessary data points from TimeScape to run the requested calculations, allowing Sigma Capital to quickly calculate term structures by simply entering the time interval to be calculated, Hackman says.

Export and Sale

The vendor has also added the ability to export Sigma Capital’s results from the TimeScape Spreads Application into MultiCharts for further analysis. “Using TimeScape, in five minutes, I can see graphically the result for a calendar spread over several years—where are the spikes up and down, and did it perform as I thought it would?” Belanger says.

While the Spreads Application was custom developed for Sigma Capital, Xenomorph could also provide the application to other firms interested in using the tool, but would first strip out any elements proprietary to the firm, Hackman says.

by Vicki Chan

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