Hello Professionals, What license(s) is required to lease the use of algos to interested parties? For example, my diversified linear regression algo is a performer, consistently earning an annualized return in the range of 17.4-19.2% (including immediate reinvestment for compounding profits) and a very low risk coefficient. I want to lease use of the algo, take a 2% haircut; yet, keep the source code a trade secret. How can I do this and stay out of the clink? Perhaps better to partner with or even work for a hedge fund, that has cut through all the red tape? Thanks, Keith
Heya Robert, great to hear from you again. It's a lot of work to found something like this: a lot of red tape, regulation, etc. I just want to focus on what I do best: the math, python, statistics, pattern matching, data science, AI/ML, Extract Transform and Load (ETL) of MD, and automation/algo. BTW does Lightspeed offer an API, including market data feed subscriptions?
We offer Lightspeed Trader, Sterling Trader Pro, EZE EMS (RealTick) and CBOE SILEXX. Only RealTick will pass through market data to the API. Maybe you should partner with someone that has run a hedge fund before. They raise money and manage the fund and you do your thing.
You could use Darvinex to let people invest into your strat. They have no idea what trades you take or wheter it is automated or not.
What’s the frequency of your algo? Does it hold overnight? What’s the capacity? Is there a minimum buying power to make it run true to backtest? Does it take liquidity? Have you run it live?
- Frequency is limited by my retail data speeds, and typically cycles between 1 and 15 minutes. - No it does not hold overnight. Also doesn’t short to avoid fees. - 10k minimum buying power, to run it against, say, NYSE:F, but better is to employ a separate algo diversifies across different assets to minimize risk. So I wouldn’t run it with a very dollar against F, I’d spread it around. - What do you mean by “does it take liquidity?” - Backtests have been solid. Biggest problem is if a sudden plunge hits and I can’t get out in time.
Take liquidity is lifting offers / hitting bids (i.e. remove liquidity provided by other market participants). The opposite would be to provide liquidity, i.e. place limit orders that are not immediately executable against existing bids / offers on the exchange / market place. (Usually market places charge for removing liquidity and pay you for providing liquidity. This is to 'attract' volume to the market place / ECN)
Oh… gotcha. I generally don’t like using limit, stop, or orders that reveal my intention. I prefer to “hold my hand close.” Trading is a war of information, and I reveal the absolute minimum. Especially after in a past life working iceberg orders, VWAP, and the like, which are specifically designed to hide intention. Why telegraph my moves on the books for the world to see? (Honestly as a retail trader it doesn’t matter… my orders won’t move the market, it’s more just about the principle and technique. If I pick up another role at a hedge fund it will matter more. Also if my algos do grow I want them to be properly secured.) Specifically, I monitor the prices on my systems and place market orders when conditions match. I have my own “limit order algo.” I think that a limit order at the exchange becomes a market order anyway when the market price moves to equal the bid/ask price in on the books, right? Not totally clear about this… I need to book up on market microstructure.