GX2 Trading Platform

GX2CollagePerspective
  • GX2 is a system for executing spreads of multiproduct, customized, relative value spread relationships that are executed precisely at the limit price of the spread level, always in balance, and never legged.
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  • GX2 is built on a state-of-the-art technology foundation but it is not a traditional ISV.  GX2 is a platform comprised of a trading desk, execution algorithms and risk management.
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  • The company’s world-class trading platform allows users to receive quality, actionable prices on customized spreads, baskets, or strategies. With GX2, users no longer have to worry about colocation costs, infrastructure costs and escalating technology headaches.
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  • Cross-venue, cross-asset class spreading functionality.
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  • Fully customizable tickets.
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  • Easy to manage limit order book.
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  • Friendly and flexible user interface.
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  • Server-based, colocated execution performance accessed through a thin client trading GUI.
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  • GX2 allows end-users to focus on what matters most; alpha generation.

The  Problem

GX2 owes its beginnings to a proprietary trading firm that used a traditional predicated spreader to execute automated trading strategies.  The firm had difficulty running these automated strategies profitably due to a lack of back test accuracy, tracking error and incomplete fills such as getting “legged” during execution.  Getting legged occurs during spread execution when certain instruments in a spread are filled at the target price but one or more other instruments are not. Getting legged introduces directional market risk that is not a part of the trader’s strategy.  A better tool for spread execution was required.

The  Solution

In order to solve this problem, GX2 was created.  GX2 uses algorithms to generate theoretical fair markets in the underlying instruments of a spread.  From these prices, the system generates fills to traders that are always in balance; never “legged” and never away from the spread order level.  Once the fill is delivered to the trader, the system inherits the execution risk and proceeds to execute against existing inventory or the aggregated marketplace using automated trading strategies to optimally fill each individual leg over varying time frames. By managing the system’s inventory with highly optimized, tick sensitive, relatively short-term automated strategies, GX2 controls its market risk with a great effectiveness.  As a result, GX2 can create streaming, actionable bid and ask markets for any custom spread relationship.   An executed spread is delivered to the client trader once the trader’s order price meets this indicative market.

Client traders can create a custom trading ticket to reflect the risk profile that they desire without the numerous steps needed in the past to both build into and exit from relative value positions.  When the true cost of execution is factored in, accounting for slippage and a trader’s time and effort managing legs, GX2 will meet and exceed the performance of other ISV spreading platforms while providing a much better user experience.  Many factors contribute to creating this advantage:  colocation with exchanges, maintaining low latency connectivity, proprietary price feed handlers, a logical GUI, and efficient order gateways.  Most important is our continual incremental improvement and optimization effort for the execution algorithm layer which makes all of this possible.

The  Benefits

This leads to the true strength of the system which we feel lies in providing the client trader better, more flexible tools.  GX2 lowers the cost of execution.  Trader testimonials suggest that the overall cost of execution is reduced by 40% over traditional spreaders.  In yield curve relationships, GX2 presents bid/ask spreads that are up to 60% tighter than those shown on more traditional platforms.

The  Market

GX2’s target customer is one who is actively involved in the markets, trades strategies/spreads, trades frequently, and has been fatigued by the investment of time and money on technology to reduce slippage.

The  Competition

GX2 Systems, LLC holds a United States Patent: System, Method and Apparatus For Creating and Executing Inter-Exchange Spread Instruments. GX2 Systems, LLC, assignee. Patent US 8341059 B1. 25 Dec. 2012.  No ISV or Primary Dealer platform other than GX2 in the marketplace today offers guaranteed, decimalized, cross-venue, streaming spread pricing.

The  Regulatory  Environment

INVENTORY MANAGEMENT AND SELF MATCH MITIGATION

GX2 includes a revolutionary design that creates a single point of execution per traded instrument for the firm.  This method consolidates together the interests of competing algorithms and firm inventory for optimal execution.

ROBUST RISK CONTROLS

Risk management and control is enforced using a user-friendly GUI that controls both the evaluative central agent and the executing gateways.  The risk manager can control firm-level, trader-level, and instrument group-level specific limits that are dynamically configurable.

DRAMATIC REDUCTION IN ORDER MESSAGING AND ORDER-TO-TRADE RATIO

GX2 presents streaming actionable prices to traders by evaluating the underlying market place.  Order messaging is reduced over 50 fold from traditional spread execution software.  Message to fill ratios fall to below 4:1, providing headroom for additional strategies.