Seamless integration for rapid response: The role of the API-Centric OEMS

From a macroeconomic and geopolitical perspective, the second half of 2024 is shaping up to be a highly turbulent period. At least 64 countries (including the US, the UK and many within the European Union) are scheduled to hold national elections, the results of which will undoubtedly prove consequential for years to come. Add to this the continuing conflicts in Europe and the Middle East – and the potential risk of escalation – and the markets are understandably nervous.

In this environment, asset managers and hedge funds need to be able to rapidly react and respond to market events. This can be achieved through the deployment of sophisticated API-centric OEMS technology. By facilitating the seamless integration of a firm’s trading models with a range of sources and destinations (both internal and external), an OEMS platform architected around comprehensive, functionally rich, well-documented APIs enables the firm to rapidly adjust its strategies in response to market events.

One such platform is TORA, built from the ground up around an open, scalable, EMS-based architecture. As an API-centric OEMS platform, the APIs exposed to clients are the same as those used internally on an ongoing basis to connect the various services that run within the system.

This open systems approach is a fundamental design principle of TORA, allowing for much greater flexibility, particularly around systematic trading. Its scalable foundation ensures that the system can automatically handle significant growth in throughput without compromising performance. The backbone of this capability is TORA’s scalable, cloud-based backend architecture, which enables firms to execute strategies of thousands of orders – whether involving single names or program-based baskets - without impacting latency.

“Clients using TORA’s APIs typically have their own systems that dictate trading strategies, including what to trade, how to trade it, and when,” says Jason LeDell, Director, Product Management at LSEG TORA. “However, integrating these systems with brokers, algorithms, and other necessary resources can be challenging. TORA simplifies this and significantly reduces the time to market for clients by allowing seamless integration with market data, execution venues, positions, compliance and risk limits, and many other essential services. The API also provides access to functionality for pairs trading, and algorithmic trading, among other capabilities.”

To respond rapidly to market changes, it's crucial to have an API that is comprehensive and free of limitations. TORA’s API covers all standard requirements, such as creating and sending orders and monitoring fills. Additionally, it allows users to subscribe to their positions and create orders and RFQs directly through the API, thus streamlining the process of liquidating positions without needing to consult external systems.

“One unique feature of TORA is its robust and functionally rich Pairs API,” comments LeDell.  “This allows users to create, issue, send, amend, and cancel pairs orders with all parameters fully accessible within the API, while also monitoring the fills as they come in. If trades are not occurring quickly enough, users can adjust the parameters to be more aggressive, all within the API.”

He continues: “The pairs API also includes a feature called Market Pair. Unlike traditional pairs that trade based on specific pre-defined market conditions, the Market Pair operates without conditions. Its primary purpose is to move a position from one instrument to another of the same notional size, which is particularly useful for quickly converting large numbers of positions. For instance, an upcoming market event may trigger a requirement to rapidly shift an investment from 5-year Treasury futures to 10-year Treasury futures. The Market Pair allows the firm to unwind the 5-year positions and ramp up the 10-year positions in lockstep, ensuring that a balanced investment is maintained. All of this can be done via the API, ensuring complete automation when rolling positions into different instruments while monitoring the speed of order fills and making real-time adjustments.”

There are many additional ways that firms can benefit from TORA’s APIs. From an order execution perspective, a fund might wish to automatically adjust its execution participation rates based upon real-time market volumes together with its own volume predictions. This is possible within TORA because, based upon the parameters that have been set, the API can enable order slices sent into the markets to be automatically adjusted to be more aggressive or passive for optimum execution, either using broker algos or DMA slices.

A key and unique aspect of TORA’s API is its ability to fully access and subscribe to parameters within broker algos. This means that firms can add the necessary parameters to their orders that are specific to a broker’s own VWAP for example. So, if the broker updates its algos and changes its parameters, by providing the ability to subscribe through the API, TORA handles the update, and the user has immediate access to that additional information.

Another use case is where a beta-neutral fund might wish to automatically rebalance its position as its exposures change throughout the day and execute rebalance slices at specific time intervals as baskets. TORA’s API makes beta hedging more efficient by managing the individual orders within the baskets using algo parameters, combining the client’s own factor models with factor models from the OEMS to execute within the momentum of the market.

In situations where the market dictates a short-selling opportunity, TORA’s API also supports borrow requests. This allows users to react quickly by obtaining the stock locate for a short-sell order through an API call, thus ensuring that firms can efficiently and effectively manage their trading operations in real time.

TORA provides an interactive implementation framework that provides clients with a sandbox, where they can simply search for keywords and go straight to a coding environment with built-in, web-based documentation, allowing them to experiment and see meaningful results. Within the sandbox, TORA provides coding samples that clients can use as a starting point, changing them to suit their needs, and testing in relevant scenarios before going to production.

“To enable the highest levels of automation and flexibility, clients can control parameters within their trading models via both API and front-end GUI,” explains Pascal Kuyten, VP, Head of Best Execution at LSEG TORA. “For example, a trade intent can be generated through the API, but it can also come from a trader taking an action in the UI that is then handed over to the API (or vice versa). Essentially, the UI is just another endpoint for the API. This handover mechanism is unique, allowing traders to enrich incoming and outgoing data, with additional TCA (transaction cost analysis) data, for example, which can provide recommendations around order routing based upon pre-defined parameters.”

Recognising that many firms rely on complex Excel spreadsheets to support their trading operations, TORA’s APIs can be used directly from within Excel using TORA’s native Excel AddIn, which supports VBA and RTD, along with data visualisation dashboards. “That means clients can continue to use logic within the applications they’re familiar with and seamlessly connect those to TORA in real time, having everything updated automatically,” says Kuyten.

TORA also works in close co-operation with clients to fully understand their use cases, guiding their API implementations, advising which API workflows are most suited to their individual systematic trading needs, and integrating the APIs to accommodate internal systems and workflows.

In the world of OEMS solutions - particularly legacy platforms – APIs are often found to be lacking. TORA’s API is characterised by its ease of integration, achieved through clear and comprehensive documentation, including usage examples, endpoint descriptions, parameter details, and error codes, along with libraries and SDKs available in multiple programming languages. Reliability and stability are also key design features; TORA’s robust API delivers high uptime, proper error handling, and clear error messages that help developers troubleshoot issues quickly. Security is paramount, with strong authentication and authorisation mechanisms like OAuth and API keys, coupled with encrypted data transmission to protect sensitive information. Scalability is another critical aspect, ensuring that the API can handle a large number of requests efficiently as user bases and data loads grow, without compromising performance.

Consistency in naming conventions, response formats, and endpoint structures reduces the learning curve for developers and enhances usability. A clear versioning strategy ensures backward compatibility, allowing developers to upgrade to new versions without breaking existing integrations. Performance, with fast response times and low latency, is crucial, especially in high-frequency trading environments, with optimised endpoints to minimise processing time and network latency.

Excellent support and community engagement, including forums, dedicated support teams, and active user communities, help developers quickly resolve issues and share best practices. Additionally, flexibility in functionality and customisation options allows developers to tailor the API to their specific needs. Monitoring and analytics tools built into the API enable developers to track usage, performance metrics, and logs, proactively identifying and addressing potential issues.

In summary, TORA’s API-centric OEMS platform stands out as a robust solution, offering unparalleled flexibility, scalability, and integration capabilities. In a landscape marked by geopolitical upheaval and market volatility, TORA's commitment to innovation and comprehensive support ensures that clients are well-equipped to navigate the complexities of modern trading with confidence and precision.