Vladan Jovanovic
Vladan Jovanovic

Millisecond Arbitrage

We talk with Vladan Jovanovic about how his technology and trading firm arbitrages the latency and matching algorithms of futures exchanges.

First Published: e-Forex Magazine 21 / Case Study / October, 2005

What markets do you operate in?Most major futures exchanges, across a variety of bond, interest rate, commodity and of course cur-rency futures. For currencies we operate exclusively in the CME’s currency futures products.What is your trading methodology based upon and what inefficiencies is it exploiting?It is automatically arbitraging latency within the exchanges’ matching engines and also the inability of those engines to detect certain matches across orders in the market. In a sense, you could also say that we are arbitraging the latency in other market participants’ applications and networks.Can you give an example?While we actually have multiple arbitrage strategies per market, one extremely simple example would be where we take advantage of the mispricing between a quoted front/next month spread and the price achievable by executing that spread as two independent legs.Such opportunities are seldom available for very long and only tend to occur with any frequency dur-ing very...continued

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