ADVANCED TRADING SYSTEM
Introduction:
The program has to perform the following steps. First it retrieves market data out of external feed (for example stock exchange) through an interface. Based on that information it makes a decision based on our trading strategy and convert this to trading signals (buy/sell). It then sends these trading signals through an interface to a broker and afterwards process feedback (e.g. confirmations, errors, …) from these external systems (for example the broker).
The advanced trading system is divided in these modules:
[1] The TRADING module contains all processes that are the ‘core’ of the advanced trading system. This includes a payment to the broker, executing trading strategies, sending orders and receiving money from the broker. The trading module is the ‘core’ of the advanced trading system. These processes describe how data from a provider is processed. This includes real time streaming market data, historical market data, fundamental and macro data (eps, consumer confidence, unemployment, …). Frequently the active combinations of strategies, parameters and securities is updated to select the best combinations. Data are then analyse based on the active trading strategies, which generates a order that will be sent to the broker.
[2] The MONITORING module monitors all important activities and create warning if necessary. The monitoring module monitors all important ‘core’ processes and generate warnings when unexpected values are detected or unwanted actions take place. This includes monitoring of payments, execution of orders and the performance of the trading strategy, financial accounting and all parts of the system. The results are first stored in the database and if necessary warning will be sent through SMS, email or the website, depending on the settings.
[3] With the CONFIGURATION module it is possible to configure settings and create analyses and reports on performance of portfolios and strategies. The configuration module makes it possible to setup, configure, define and analyse the advanced trading system. This includes:
• Repairing any missing data when for example no market date have been received for a while or historical data have to be updated.
• Defining of strategies with various parameters, this includes the timing of updating the active strategies, parameters and securities and the timing of execution of the signals.
• Managing risk appetite, the trading strategies, loss exit scenarios, forbidden securities and excluded trading / opening times.
• Configuring security settings like accounts, passwords and authorisations. Also the way warnings have to be sent (SMS, email or website) can be defined per type of warning.
• Managing the accounts with providers and brokers, including their cost/fee structures.
[4] The FINANCIAL ACCOUNTING module takes care of all bookings in the general ledger. The financial accounting module manages all bookings that have to be registered based on the executed orders and all payments. It is also possible to configure how automatic bookings have to take place. Financial reports can be created as well. In this module it is also configured how fees have to be registered: fixed, percentage of portfolio or part of performance.
[5] The PAYMENT module enables the user to manage payments from / to investors, management and the broker. The payments module takes care of the processing of payments from / to investors, management and the broker. These processes describe how initially money of investors is sent to the broker. After a while, the broker will be requested to send money back to the bank account. In addition, manual payments can be performed as well.
Communication:
[1] The broker communicates with the exchange and the custodian. At the exchange the equities are bought/sold at a certain price that represents a value and the custodian holds the administrations of these equities.
• Via the broker it is possible to send orders (represented by data) to buy/sell equities at the exchange.
• The money that will be paid/received by the broker comes from / goes to the account at the broker.
• The trade is then finished by exchanging information on the equities.
• The broker can also be requested to give a complete overview (data) of all orders and all the equities in the portfolio that is registered at the custodian.
[2] The bank holds the money. To buy/sell equities the broker needs that money on a special account.
• The broker receives money for the special account to buy/sell equities. The broker can be requested (data) to give information on the amount on the account (balance and transactions).
• By sending requests and orders (data) to the bank information on the account (balance and transactions) is given and payments will by executed by the bank.
• A request (data) to withdraw money from the account at the broker is sent to the broker. The money will then be transferred to the account at the bank.
• The money of the investors is put on the account at the bank as well.
[3] The advanced trading system, the provider, the broker and the bank will apply some kind of fee/cost structure.
• The provider will be paid a fee and an additional fee. This money has to be paid when the provider sends a bill.
• The cost structure for the broker is based on a fixed fee and a fee per trade. The broker will withdraw this money automatically from the account.
• The costs for the bank consist of a fee. The bank will withdraw the money from the bank account.
• The portfolio that is managed for the investor, the advanced trading system will receive a management fee and a performance fee. The money that is needed for the fee is booked in the general ledger.
