Trayport says it plans to anticipate this with the launch of an automated trading engine in the third quarter. “Automated trading was always eventually going to creep into any form of electronic trading,” said Elliott Piggott, managing director of Trayport in London. “Now it’s here in commodities.”
The company has finished writing the software and is testing it with users. The system is an offshoot of Trayport’s Trading Gateway front office trading software, which enables traders to compare prices in many liquidity pools for electricity, fossil fuels and freight.
Kevin Heffron, Trayport’s deputy managing director, said automated trading was still very much at the beginning of its development in European commodity markets. “But if you look at the exchanges in the US,” he said, “the automated traders are running the short end of the curve now, using their own proprietary systems. In five years, I’d say everybody will need this. Now, maybe half. People will realise this is a basic tool, part of the tool box.”
Piggott said the engine used the mapping function in Trading Gateway, which customers employ to choose the contracts or prices they want to compare with each other. This function is designed to cope with the fact that many banks and exchanges may offer similar commodity contracts with slightly different names or terms.
Trayport’s algo trading engine is designed to span the full range of tasks from algorithmic execution – using computers to get orders done as efficiently as possible – to trading strategies based on comparing different price movements.