Custom electronic trading software versus out-of-the-box, what’s best?
By Jean-Baptiste Sterlin, Product Owner at Horizon Software-
When choosing the perfect trading software for your business, there are many different points to consider. Deciding whether to select custom development or an out-of-the-box solution is a great start, but how do you decide which one to choose? Part of your decision-making process will, of course, include shopping around to find the out-of-box solution that is the best fit for your organization’s needs. Although you may find something that feels like a pretty good fit, it’s likely that it will come with some compromises. But some things are just better when they’re made from scratch, exactly the way you want them. As you go into this decision-making process the golden rule here is: understand your business needs and make sure the solution is a good fit. It’s not an easy choice to make.
“Actually, when it comes to sophisticated electronic trading, you need both…”
Algorithmic strategies and standard market connectivity
With the constant evolution of trading strategies comes increased demand for flexibility and customization. When it comes to installing a powerful and custom algorithm framework, connectivity to multiple exchanges is key. Out-of-the-box trading software solutions need to offer standard integration with rich APIs and an environment to code and run trading strategies or enrich the system with proprietary data. The framework needs to provide out-of-the-box market access to facilitate connectivity but should also let buy-side and sell-side institutions deploy and run proprietary algorithmic trading strategies in a secure and stable environment. Opening trading opportunities across exchanges worldwide and allowing the integration of specific algorithm strategies comes with the need to use custom out-of-the-box solutions.
Custom and flexible hedging in market making
Let’s talk about hedging strategies. Managing hedging with a turnkey and flexible solution can bring a lot of benefits. There are many different strategies around hedging and the ability to hedge derivatives. When looking for investment options, hedging helps the investor to spread their risks and reduce them to a certain extent. As the market is unpredictable so are the hedging techniques. The hedging technique will have a constant modification as per the market situation and the investment type. Hedging strategies can happen immediately or occur at certain times during the day by building specific positions. Using tools that can manage positions with the preparation of hedging decisions and at the same time conduct immediate simple hedging strategies is a real plus. The ideal software will help you compare and analyze execution quality based on different sorts of hedging strategies and the algorithm trading platform will improve execution quality on hedging.
“Custom versus out-of-the-box shouldn’t be a choice”
Customization doesn’t mean more effort and more risks. An electronic trading platform should offer the best of both worlds. Relying on a custom out-of-the-box solution allows to optimize proprietary trading strategies while taking benefits from a turnkey solution that is ready-to-use and can easily be implemented into current trading processes for basic execution.
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