Trading from the Front: A CEP Hedge Fund

Corwin Yu, Director of Trading at PhaseCapital, sits down with FIXGlobal to discuss his trading architecture, the proliferation of Complex Event Processing (CEP) and why he would rather his brokers just not call.

FIXGlobal: What instruments does your system cover?
Corwin Yu: At the moment, we trade the S&P 500, and we have expanded that to include the Russell 2000, although not as an individual instrument, but as an index. We also trade the E-Mini futures on the Russell 2000 and also for the S&P500. We have done some investigation on doing the same exact type of trading with Treasuries using the TIPS indices and the TIPS ETFs and a few of the similar futures regarding those as well. We are not looking at expanding the equity side except to consider adding ETFs, indices, or futures of indices.

FG: Anything you would not add to your list?
CY: We gravitate to liquid items with substantial historical market data because we really do not enter into a particular trading strategy unless there is market data to do sufficient
back testing. Equities was a great fit because it has history behind it and great technology for market data, likewise for futures, where market data coverage has recently expanded. Options is a possibility, but the other asset class that is liquid but not a good fit is commodities. We shy away from emerging markets that are not completely electronic and do not have good market data. While we have not made moves into the emerging markets, we know that some other systematic traders have found opportunities there.

FG: How much of your architecture is original and how often do you review it for upgrades?
CY: In terms of hardware, we maintain a two year end-of-life cycle, so whatever we have that is two years old, we retire to the back-test pool and purchase new hardware. We are just past the four year mark right now, so we have been through two hardware migrations. Usually this process is a wakeup call as to how technology has changed. When we bought our first servers, they were expensive four-core machines with a maximum memory of 64 GB. We just bought another system that can handle 256 GB through six-core processors. We are researching a one year end-of-life cycle because two years was a big leap in terms of technology and we could have leveraged some of that a year ago.