ATF Trading Platform Manual (Demo)

Transcription

1 ATF Trading Platform Manual (Demo) Latest update: January 2014 Orders: market orders, limit orders (for real platform) Supported Browsers: Internet Explorer, Google Chrome, Firefox, ios, Android (no separate application) Current with ATF TP Demo V 1.2 Compliance Monitoring System Specifications: leverage, trading frequency, asset classes, security types, source: short/long, investment strategy persistence, market capitalization test.

2 Content Introduction 2 Logging in to ATF 3-5 Trading. 6 Proportion principle - explained Amending the proxy instruments Manual mode Definition of fields in the ATF Trading Platform.. 24 Order navigation panel.. 24 Fund statistics Client summary statistics. 26 1

3 Introduction The ATF Trading Platform is an online mirroring platform that allows asset managers to manage both their personal account which we refer to as the Fund - and attached client accounts simultaneously. The demo version allows you to see how the actual trading process occurs when your Fund is attached to hypothetical client accounts. This tutorial will guide you through how to use our platform, including instructions on how to: 1. View and track account balances, order activity, and executions using the account information and executions windows 2. Run a stress test on the efficiency of an allocation to client accounts before you conduct a trade 3. Conduct trades in your account and attached client accounts 4. Use different proxy instruments to lower the mismatch between your portfolio and attached client portfolios And more You can test all of the features we will be discussing in the ATF Trading platform demo. Please note that the demo version has limited and simplified functionality compared to the full version of the platform (ATF Trading Platform). Table 1. Functionality comparison between ATF TP Demo and ATF TP* Parameter ATF TP Demo ATF TP Asset classes US Stocks, US Futures (limited sample), foreign stocks (limited sample), Forex (limited sample) US and foreign stocks (many currencies are supported), Futures, Options, Bonds, FX. Over 100 exchanges worldwide Client portfolios 3 Unlimited Rounding 0.9 rule** adjustable Proxy instruments Only S&P Many for many assets, ability to create personalized matrix Supported base currencies USD Many Supported instrument USD, EUR Many currencies *Not all parameters are being compared here ** we subtract whole number from the given number and round the fractional part according to the following principle: anything above 0.9 is rounded to 1, anything below 0.9 is rounded to 0. For example, if target number of instruments is 2.6, the system will advice to buy 2. If target number of instruments is 2.91, the system will advice to buy 3. 2

4 Logging in to ATF Log in to the ATF Trading platform using the login screen on the atfexchange website (Picture 1). Picture 1. Log in Screen By logging in you can access the trading platform main screen (Picture 2). The left part of the screen aggregates your brokerage account statistics which we refer to as the Fund, including: 1. Current margin requirements; 2. Leverage; 3. Liquidity; 4. Net Liquidation Value and current portfolio breakdown; The right-hand side of the screen shows account summary statistics for each attached client account, including: 5. Assets under management; 6. Leverage; 7. Liquidity and 8. Match criteria, which is a parameter that estimates how precisely a client account is following the Fund. 3

5 Picture 2. Main trading screen snapshot The left part of the screen aggregates your brokerage account statistics which we refer to as the Fund The right-hand side of the screen shows account summary statistics for each attached client account Trading section for order execution Client accounts, here, 18 clients Client account Match criteria Client account liquidity in % Current Fund margin requirements and liquidity in $ Client account leverage Fund Leverage Fund Liquidity in % Assets under management for particular client (AUM attached to the Fund) Fund Positions Net Liquidation Value of the Fund Fund Portfolio Breakdown Click on the Navigation panel to access client detailed account statistics 4

6 Detailed statistics on each attached client account can be accessed by clicking on the navigation panel for a particular client account (Picture 2). A separate screen (Picture 3) will then show the summary statistics for each attached client account, including: 9. Current margin requirements 10. Leverage 11. Liquidity as well as 12. Existing position details Picture 3. Client account detailed statistics. Client account summary screen Current Client account margin requirements and liquidity in $ Client account Leverage Client account Liquidity in % Fund position Client account Positions Net Liquidation Value of the Client Account Client account Portfolio Breakdown 5

7 Trading In this section we will discuss how to conduct trades on your account which we refer to as the Fund and attached client accounts. Before you begin to trade you need to populate your order screen with market data. Picture 4. Order execution section. 1. Select the asset class 2. Enter security symbol 3. Hit Search to upload security market data 4. Selected security market data is uploaded after you have identified the security 5. Select Buy or Sell 6. Choose quantity To create a market data line, select the asset class you intend to trade. Our system supports US and foreign Stocks, Futures, Options, FOREX, Bonds and covers over 100 exchanges worldwide. The demo version provides limited access to these instruments as highlighted in Table 1. Enter an underlying symbol, hit Search and select the one you need from the dropdown menu. The selected instrument and market data is immediatelly presented on the market data screen. The instrument you see on the market data screen is the one that will be traded for the Fund and the attached client accounts. Select the buy or sell side for the forthcoming order, choose the quantity you intend to trade for the Fund and, adhering to the proportion principle, the attached client accounts (quantity to be traded for attached client accounts will be determined automatically). 6

8 Proportion principle - explained The proportion principle is based on the Net liquidation value ratio between the Fund and each client account. We refer to this as the share allocation algorithm. Before moving on, let s discuss the share allocation alogorithm engine. The allocation algorithm distributes shares based on a single method current net liquidation proportion between the Fund and each attached client account. Let s look at an example. Suppose your personal account (the Fund) is worth USD 150,000 and you have 3 client accounts attached to it A, B and C, with Net liquidation values in the amounts of USD 150,000 for account A, USD 80,000 for account B and USD 400,000 for account C. The system then calculates a ratio for each account versus the Fund; 150/150 for account A, 80/150 for account B and 400/150 for account C, and adheres to the proportions of this allocation at all times. Suppose you want to obtain approximately 100% Dow Jones exposure by buying 1 Dow Jones Industrial Futures, with a contract value of USD 150,540. The Fund actual exposure to Dow Jones will then be / or %. The system then calculates the target exposure in dollar terms for each client account based on the proportion between the Fund and respective client account. In our example, the system sets the target exposure of USD 150,540 (150/150 = 1 * $150,540 = $150,540) to client A, USD 80,288 (80/150 = * $150,540 = $80,288) target exposure to client B and USD 401,440 (400/150 =2.67 * $150,540 = $401,440) target exposure to client C to keep the percentage exposure to the Dow Jones equal for all clients (i.e. at %) The problem is how to obtain the precise exposure for each client. The value of futures contracts can be large (picture 5) relative to the size of a client account, which makes it difficult to obtain the precise targeted exposure. Table 2. Share Allocation Algorithm Type Target allocation, % NLV Target allocation, $ Fund , ,540 Client A , ,540 Client B ,000 80,288 Client C , ,440 7

9 Picture 5. Dow Jones Bloomberg Snapshot. Min. lot size is $ Source: Bloomberg For example, Client B s required exposure of USD 80,288 to the Dow Jones cannot be constructed via Dow Jones futures, as the minimum lot size of such futures is USD 150,540 (Picture 5), almost double what is required. Our Different Lot equalization technology allows the ATF platform to minimize the mismatch caused by the different account sizes and the large contract values for some financial instruments. In particular, each instrument with a large contract value has a predetermined proxy instrument with a lower contract size. In our example, the Dow Jones futures with a contract value of USD 150,540 can be proxied by E-mini Dow futures with a contract value of around USD 75,000 (Picture 6) and furthermore by DOW ETF at a price of USD 151 per share. 8

10 Picture 6. Mini Dow Bloomberg Snapshot Min. lot size is 75270$ Source: Bloomberg For each client account the system finds the best combination of proxy instruments to obtain the target exposure as precisely as possible. In our example, when the asset manager intends to buy 1 Dow Jones futures for the Fund, the system will automatically construct the exposure for attached client accounts by using the proxy instruments and will advise the manager to buy: 1. 1 Dow Jones futures for client A, for a total exposure of USD 150,540 which is equal to the targeted exposure USD 150, mini Dow Jones futures, and 33 Dow Jones ETFs, for client B, for a total exposure of USD 80,263, which is close to the targeted exposure USD 80, Dow Jones futures, 1 mini Dow Jones futures and 166 DOW ETFs for client C, for a total exposure of USD 401,426, which is close to the targeted exposure USD 401,440. The match criteria (Picture 7), which is highlighted on each client navigation screen, shows the difference between the target amount, based on the proportion principle, and actual amount constructed via the available instruments. 9

11 Picture 7. Match criteria. Match criteria is calculated for each client account As explained, by using the proxy instruments when required, you can significantly increase the match criteria. The higher the Match criteria the lower the tracking error between the Fund and attached client account. If proxy instruments are not available, the alternative method would be to use three futures for account C, calculated according to simple rounding: $401,440 target exposure to client C divided by minimum lot size of the futures contract $150,540 = 2.66 futures rounded to 3. Our system, however, does not operate on a simple rounding basis, but rather on skewed rounding basis. In particular, when rounding, we always subtract the whole part from the actual number and then round the fractional part based on the following principle: anything above 0.9 is rounded to 1 and anything below 0.9 is rounded to 0. So if proxy instruments are not available, the alternative method would be to use two futures for account C (three futures would have been used if targeted allocation would have been >=2.90). However, this method is significantly less accurate than using the allocation algorithm since the actual exposure of account C to the Dow Jones would then be lower than the targeted exposure, that is around USD 301, 080 (2.66 rounded to 2 based on skewed rounding and multiplied by USD 150,540 = USD 301,080) instead of USD 401,000 using the more precise proxy method. Now, let s see the actual trading process. After you have identified the correct instrument and you are ready to conduct a trade, press the Preview button (Picture 8) to see the hypothetical effect of the trade on margins, liquidity as well as on match criteria, before you actually execute the trade for your clients and the Fund. The preview function does not execute the trades, but allows you to perform a stress test, that is it shows how all the relevant statistics will change if the trade is conducted without actually executing the trade. 10

12 Picture 8. Preview function. 1. Identify the instrument 2. Press Preview to see the hypothetical result of the trade Instrument that you intend to trade is highlighted in the position tab in blue 3. Both Fund statistics and each Client account statistics is immediately updated, taking into account hypothetical trade results You can also see the instrument that you intend to trade in the positions tab. This position tab is shown in dark blue which means that this is only a hypothetical position; no actual trades have been executed yet. Executed positions will be shown on the gray bars (Picture 10). If you are satisfied with the Match/Liquidity criteria for all of your clients as well as for the Fund, hit the Execute button to transmit your order (Picture 9). 11

13 Picture 9. Execute function. Hit the Execute Button to actually execute the trade. When the order is accepted, it becomes a pending order. The pending tabs indicate that orders are working but not yet executed. Once orders are executed, the pending tabs will disappear and the position line color becomes gray (Picture 10). This means that you have added a new position to the Fund and the attached client accounts. Picture 10 - Executed orders (basic view) Instrument that you have added to the portfolio is highlighted in the position tab in gray 12

14 Amending the proxy instruments In the previous part we looked at the ideal situation when the system always determines proxy instruments to maximize the match criteria. In a situation when no proxy instrument has been identified by our system for instruments with large contract values, accounts with different sizes can experience a significant mismatch, as has already been explained. Let s consider the previous example when the asset manager intended to buy one Dow Jones futures with contract value of USD 150,540 to obtain approximately 100% exposure to Dow Jones futures. Let s also assume no proxy instrument has been identified by our system for the Dow Jones futures. After hitting the Preview button, the system will try to obtain the required exposure by using only 1 instrument Dow Jones futures with a USD 150,540 contract value and therefore will allocate 1 contract to the Fund, 1 contract to client A, 0 contracts to client B and 2 contracts to client C, based on our skewed rounding algorithm (Table 3) Table 3 Share allocation algorithm Type Target NLV Target Minimum Simple Skewed Contracts to Projected 4/5 match allocation, % allocation, $ lot size of Futures Rounding (4/5) Rounding be bought (based on 7) Exposure Fund , , ,540 1 = 1 1= , % Client A , , ,540 1 = 1 1= , % Client B ,000 80, , = = N/A ( ) Very low Client C , , , = = ,080 1,33 Average As a result, due to rounding the actual exposure will differ from the targeted exposure, which will cause low match criteria for some accounts (Picture 11). Picture 11. Preview function in case of absence of proxy instruments 1. Hit the Amend button to alter the allocation and increase the match criteria (if possible) Since no proxy instruments have been identified, some accounts will experience large mismatch, i.e. targeted exposure will significantly differ from the actual exposure. 13

15 To manually adjust the allocation profile or identify proxy instruments, hit the Amend button for each client where the match criteria is low (Picture 11). For example, let s amend the composition manually for client B. Hitting the Amend button will give you a detailed view of the client portfolio where you can see detailed account statistics, as well as the instrument or instruments which the system advises you to trade. The darker upper part shows the instruments the Fund itself targets to trade (Picture 12). Picture 12. Amend mode Instrument that Fund targets to trade Instruments Target and actual that Client weights account not equal targets to trade Match criteria is low As shown in the previous example, with automatic proxy instruments available and identified, the position tab would look like this, that is the system advises you to buy 1 mini Dow Jones futures and 33 Dow Jones ETFs (Picture 13). 14

16 Picture 13. Amend mode in case of identified proxy instruments Instrument that Fund targets to trade Instruments that that Client Client account account targets targets to trade to trade Instruments Target and actual that Client account weights targets now equal to trade Match criteria is high In our example (Picture 12), when automatic proxy instruments are not available or identified, the system will advise you to buy 0 Dow Jones futures, as indicated by the proportion between the Fund and Client B Net Liquidation Values as well as based on our skewed rounding algorithm (Table 2). To alter the existing allocation profile, select the portfolio composition tab to be altered and use the trade panel to manually alter the allocation (Picture 14). In our case, we want to add mini Dow futures and 33 Dow ETFs. Select the mini Dow, select Buy, choose one in the number of contracts and hit Preview (Picture 14). You can now see the newly added instrument in the portfolio composition tab (Picture 14). 15

17 Picture 14. Positions altering. 5. Select side 1. Select the asset class 2. Enter security symbol 3. Hit Search to upload security market data 4. Selected security market data is uploaded after you have identified the security 6. Press Preview to see the hypothetical result of the trade Use this trading tab to manage the altering 7. As opposed to Picture 12, you can now see newly added position. Note that no actual trading has yet been performed. Match criteria has been improved 16

18 To add ETFs, find Dow Jones ETF, select the required amount, and hit Preview to add it to the list (Picture 15). Picture 15. Positions altering continued. 4. Select side 1. Select the asset class 2. Enter security symbol 3. Hit Search to upload security market data 5. Press Preview to see the hypothetical result of the trade Match criteria has been improved even further You can now see newly added instrument You can now see that match criteria has been significantly improved. Remember that this does not execute the actual trades; you have just set the allocation profile. Please note that if you need to delete the long position from the portfolio composition tab, identify the position and select sell (Picture 16). 17

19 Picture 16. Deleting or decreasing long position, an example. To delete security form the positions tab (security you are long), identify the targeted security and choose sell. Do delete the security that you are short, select buy in the Action field. By hitting the Back To Main Panel button (Picture 17), you can go back to the main screen. Picture 17. Back to main panel function. You can now see that the match criteria for account B has been improved (Picture 18) as opposed to situation highlighted in Picture

20 Picture 18. Match parameter Match criteria has been improved to almost 100%, meaning that expected performance of the Client account will mirror performance of the fund almost perfectly You can perform as many alterations for as many client accounts as you need. Again, notice that so far no actual trading has been performed. After you are finished making alterations, hit the Execute button and the system will start conducting trades (Picture 19); filling positions for the attached client accounts and for the Fund. Picture 19. Execute function. Hit the Execute button after you are satisfied with Match and Liquidity Criteria for all attached client accounts. Make sure Match and Liquidity parameters are high enough before you conduct the actual trade. 19

21 You can see the progress tabs which show the percentage of trades that have been filled. After all trades have been filled, the position color becomes gray, which means that the position has been added to all accounts and the Fund (Picture 20). Picture 20. Execute button continued. After all trades have been filled, the position color becomes gray, which means that the position has been added to all accounts and the Fund Manual mode You can amend the composition of any individual client portfolio without affecting the Fund or other client portfolios by using the manual mode. Manual mode operates in a similar way to the amend mode, expect it allows you to actually execute trades on a separate client account without affecting the Fund or other client accounts. To add or delete a position on a particular client account, select the manual mode (Picture 21) 20

22 Picture 21. Main screen manual mode. Hit the Manual Mode to trade directly and only on selected client account Hitting the Manual mode button will give you a detailed view of the client portfolio where you can see client account statistics (Picture 22). Picture 22. Manual mode. Suppose you want to increase only selected client account exposure to DOW JONES ETF Slight mismatch might appear after awhile due to different composition of the Fund and attached client account (i.e. 98% Match instead of 99% previously) 21

23 Let s say we want to increase client exposure to Dow Jones by buying several more DOW JONES ETFs to minimize the tracking error between the Fund and particular client account which appeared after a while. Altering a position in the Manual mode is identical to altering a position in the Amend mode. Select the position to be altered, and use the trade window to find the security you intend to trade. Hit Preview and the system will reflect the hypothetical result of the trade. Picture 23. Preview function in manual mode Hit Preview and the system will reflect the hypothetical result of the trade The difference between the Amend mode and Manual mode is that in the later you can actually execute the trade for particular client account by hitting the Execute button. (Picture 24). 22

24 Picture 24. Execution function in manual mode Hit the Execute button and the system will execute the intended trade for this account only This is opposed to what we did in previous example when, after hitting Preview, we exited the client account and Executed all trades in the main screen for the Fund and all attached client accounts. After trade has been executed, hit the Back To Main Panel button to return to the main screen. 23

25 Definition of fields in the ATF Trading Platform Most of the data fields are identical to the Interactive Brokers (IB) Webtrader. See WebTrader s manual for more information: Order navigation panel The order screen is located in the upper left side of the main screen. Picture 25 Following fields are highlighted in the order navigations screen. 1. Asset class to be traded: Stocks, Bonds, Futures, Forex, Options. Complete list of asset classes and instruments can be found here: 2. Contract: Provides the contract description including the underlying, primary exchange, and if not Smart, the directed exchange. 3. Bid: The best bid price for a contract. This is the best price at which you could currently SELL. 4. Ask: The best ask price for a contract. This is the best price at which you could currently BUY. 5. Size: The approximate depth of the current bid/ask. 6. Last: The last price at which the contract traded. A "C" in front of the last price indicates that this is the previous day's closing price. 7. Class: as defined by Interactive Brokers 8. Expiry (for futures): as defined by Interactive Brokers 9. Currency: as defined by Interactive Brokers 10. Trading Hours: as defined by Interactive Brokers 11. Action: as defined by Interactive Brokers 24

26 Fund statistics The left part of the screen aggregates your brokerage acocunt statistics. Picture 26 Following fields are available for the Fund statistics: 1. Net Liquidation value: Total cash value (which includes futures P&L) + stock value + options value + bond value. Calculation is subject to account type. NLV is Net Liquidation Value as defined by the IB. See IB TWS Guide for more information Margin requirements a. Initial Margin: Initial margin requirement in the base currency of the account. The initial margin requirement is what is required to open a new position. b. Maintenance Margin: Maintenance margin requirement in the base currency of the account. This is the value required to maintain your current positions. c. Available Funds: This value tells what you have available for trading (NLV - Initial margin.) d. Excess Liquidity: This value shows your margin cushion, before liquidation. (NLV maintenance margin) 3. Fund Leverage: (market value of all instruments in the portfolio) /( NLV) - 100% 4. Funds Liquidity as % of your NLV: (Available Funds) / (NLV) 5. Portfolio composition navigation panel: a. Contract Description: symbol and description b. Instrument name: name of the instrument c. Currency: currency of the contract d. Market price: real time price of the position e. Nr # (Position): quantity of long/short shares or contracts f. Market value: (position)*(market price). Includes multiplier for futures. g. % NLV: (Market value of the position) / (NLV in base currency (USD))

27 h. P&L: unrealized P&L. (Market value of positions) (average cost) Client summary statistics The right hand side of the platform main screen aggregates statistics on attached client portfolios. If you do not have any clients linked to your account, this part will be blank. After clients attach their accounts to the Fund, you will be able to see the summary statistics for each client account. Picture 27 Following fields are available in the attached client summary screen: 1. Client Identifier: unique number prescribed to each client 2. Match criteria: parameter that estimates how precisely client account is following the Fund. Large difference in account sizes between the Fund and client accounts as well as large notional amounts of some financial instruments (e.g. futures) might cause the performance drift between client account and the Fund. This drift is caused by the mismatch in exposure to particular instrument between the Fund and the client account. The Match criteria shows the exposure precision between the targeted amount based on the NLV ratio between the Fund and account and actual amount constructed via available instruments. The higher the Match criteria the better. Match criteria of 100% means that the ratio between the Fund NLV and client NLV is the same as the ratio between particular security exposure of Fund and the client. 3. Liquidity position (Available funds %): same as defined for the Fund. 4. Leverage: same as defined for the Fund. 5. Net Liquidation value or assets under management: same as defined for the Fund 26