OStatic

Big hedge funds, individual traders and others are driving up the amount of money invested in high-frequency quantitative trading strategies. Does that represent an opportunity for open source trading platforms? Some investors might cringe at the idea of trusting a lot of money--and trade executions--to open source software, but opportunities are arising. Marketcetera, a leading open source platform provider recently released a new version of its trading software, and will announce tomorrow that it has closed $4 million in Series A funding led by Shasta Ventures and Jack Selby of Clarium Capital--a hedge fund.

According to Ravi Mohan, Managing Director at Shasta Ventures--one of the investors--analysts predict that "50 to 60 percent of total trading will be done by algorithms by the end of the decade." Marketcetera CEO Graham Miller adds that "the $500 billion under management in high-frequency quantitative strategies will only expand as the speed of the capital markets accelerate."

Wouldn't big money like that call for expensive, proprietary trading platforms? Ravi Mohan says precisely the opposite is true: “Our investment will help Marketcetera provide trading firms a low cost scalable solution that better meets their needs than the expensive proprietary, trading platforms that they currently have access to." In other words, the expense of the proprietary trading platforms--including the expense of maintaing code--is the sticking point for many traders and investors, not the reliability of a competing open source platform.

I checked in with Graham Miller, one of Marketcetera's co-founders and CEOs for more on who is using the Marketcetera platform, and how it might lead to cost savings. "Organizations of all sizes have deployed the Marketcetera Platform, from multibillion-dollar asset managers to small currency traders," he says. "A billion-dollar hedge fund has deployed the platform as a replacement for home-grown trading tools, because of increasing maintenance costs of the custom code. A large asset manager has deployed the platform to manage a suite of connections to 200 broker dealers globally--because it is available under an open source license."

Miller adds that Marketcetera's platform is also used as glue in trading platforms that incorporate many tools. "Frequently the platform is used as an integration point for several trading systems," he says. "For example a small currency trading firm integrates a third party analytics package to a FIX connection with Currenex. We see growing interest from small hedge funds in India and up to 10 of the largest financial institutions in the world." 

Marketcetera's new round of cash will be used to expand engineering and marketing operations. Do you think open source solutions like this can save traders and investors money? Can they do so securely and reliably?

• MarketCetera