FATS Presentation

1
Forex Automatic Trading Systems
2
Forex Market Changes
Confidential Created by Mark Markovic Joe Gelet

• Number of market players is increasing
• Volatility is increasing
• Trend and prediction tools are not accurate
  comparing with the past performance
• Number of fx day traders is increasing
• Market is behaving more randomly

2
3
Conventional Approach Vs. FATS (forex automatic
trading system)
Confidential Created by Mark Markovic Joe Gelet

• Predictability
• Historical analysis
• Long time strategy
• Large share packets
• Insider information
• Diversification
• Human decision

• Randomness
• Real-time analysis
• No-time strategy
• Small share packets
• Numerical behavior
• All currencies
• System decision

3
4
Current traders vs. FATS
Confidential Created by Mark Markovic Joe Gelet

• Emotional
• Slow (5-10 seconds minimum)
• Trading Beliefs
• Trend Analysis (support, resistance)

• Mathematical
• Fast (20 milliseconds maximum)
• System Analysis
• Genetic Algorithms (optimization, recombination)

4
5
Confidential Created by Mark Markovic Joe Gelet
Speed in plain English
5
6
Confidential Created by Mark Markovic Joe Gelet
Program System Description
6
7
Program System Description
Confidential Created by Mark Markovic Joe Gelet

• PM implements different strategies simultaneously
• Program module (PM) monitors one currency
• Strategies are competing in real time
• Program Administrator evaluates all PMs
• Master Program makes decision to trade

7
8

Confidential Created by Mark Markovic Joe Gelet
Our product Money
8
9
Confidential Created by Mark Markovic Joe Gelet
0.5M
3M-8M
9
10
Programming approach
Monday, November 16, 2009
Confidential Created by Mark Markovic Joe Gelet
10
11
Programming in Assembly
Confidential Created by Mark Markovic Joe Gelet

• The commands are very short, and the computer
  does exactly what you tell it.
• The advantage to this is that the executables are
  extremely small and fast.
• An assembly program will generally run 2
  to 4 times faster than a comparable C/C
  program, and orders of magnitude faster than many
  other languages.

11
12
THE EVOLUTIONARY CYCLE
Confidential Created by Mark Markovic Joe Gelet
(Winners)
Selection
winning
Recombination
(Strategies)
Mutation
(5 change)
Replacement
12
13
Example Discrete Representation (Binary alphabet)
Confidential Created by Mark Markovic Joe Gelet

• Representation of an individual can be using
  discrete values (binary, integer, or any other
  system with a discrete set of values).
• Following is an example of binary representation.

CHROMOSOME
GENE
13
14
Example Discrete Representation (Binary alphabet)
Confidential Created by Mark Markovic Joe Gelet

• 8 bits Genotype

Phenotype

• Integer

• Real Number

• Schedule

14
15
Example Discrete Representation (Binary alphabet)
Confidential Created by Mark Markovic Joe Gelet

• Phenotype could be integer numbers

Genotype
Phenotype
163
127 026 125 024 023 022 121
120 128 32 2 1 163
15
16
Example Discrete Representation (Binary alphabet)
Confidential Created by Mark Markovic Joe Gelet

• Phenotype could be Real Numbers
• e.g. a number between 2.5 and 20.5 using 8 binary
  digits

Genotype
Phenotype
13.9609
16
17
Example Discrete Representation (Binary alphabet)
Confidential Created by Mark Markovic Joe Gelet

• Phenotype could be a Schedule
• e.g. 8 jobs, 2 time steps

Time Step
Job
1 2 3 4 5 6 7 8
2 1 2 1 1 1 2 2
Genotype

Phenotype
17
18
Monday, November 16, 2009
Forex Data Signal Processing

• The forex market is decentralized but ALL fx
  clearing firms offer an API Application Program
  Interface, which is a data feed and set of
  commands to execute your orders on their system,
  using your own custom software.
• Market Data Retrieval
• Executing Orders
• Our API will consist of reading the pure data.
  Since we are using Assembly, we will not convert
  the data to HLL format. Our signal processing
  directly inputs the raw market data to our CPU.

18
Confidential Created by Mark Markovic Joe Gelet
19
Arbitrager
Monday, November 16, 2009
Confidential Created by Mark Markovic Joe Gelet
19
20
Confidential Created by Mark Markovic Joe Gelet
FX Triangular Arbitrage
20
21
Confidential Created by Mark Markovic Joe Gelet
Evolver

• The core module, evolver will implement highly
  competitive strategies that self-adjust based on
  live market conditions in real-time.
• The holy grail strategy will change, constantly.
  The evolver system will not predict chart
  movement, but rather, adapt to current price
  action, even if it means exiting a position which
  previously looked profitable.

21
22
Security of the System
Confidential Created by Mark Markovic Joe Gelet

• Compartmentalized Development
• Modular Programming
• Assembly Programming Language
• Minimal Human Involvement
• ECN Connection
• Hardware Architecture
• Common High Security Procedures

22
23
Forex Automatic Trading Systems
Confidential Created by Mark Markovic Joe Gelet
Why forex market?

• Most liquid market
• International (not tied to domestic exchanges)
• Mathematically simple
• Quoted with pairs that are interconnected
• No 'base' currency, such as stocks when you have
  profit in dollars your profit even floats

23
24
Confidential Created by Mark Markovic Joe Gelet
Platforms

• Can trade on any fx platform offering an API
• Program will be portable between platforms using
  their API
• Platforms will eventually be part of trading
  strategies

24
25
Confidential Created by Mark Markovic Joe Gelet
25
26
Confidential Created by Mark Markovic Joe Gelet
Malta Bank

• Allow us to develop FATS project in-house this
  saves money and project is kept confidential
• Bank would service retail clients, investment
  clients, forex business, AND facilitate FATS
  project, thus giving us a hedge against FATS
  development (the bank can be extremely profitable
  even with high development costs of FATS)
• FATS investment can still be separated from bank
  investment
• Malta is UNIQUE REGION for opportunity as well as
  regulatory environment. What we will need to do
  regarding clearing trades may be easier and
  cheaper in Malta than in USA or Austria for
  example.

26
27
PROJECT UPDATE 2006
Confidential Created by Mark Markovic Joe Gelet
What we need

• FX market is infinitely better than stock market
  to implement this trading software, although it
  was originally designed with stocks in mind.
• The financial world has many available tools that
  did not exist when the project was conceived, and
  now it is much less complex from logistic
  perspective.
• Many hedge fund strategies began to wane late
  2004 and since then, many have been on the
  lookout for a new method of large scale trading,
  but have returned few solutions. Time is ripe
  for development and we would have support of the
  international hedge fund community

• A team of programmers, mathematicians, and a few
  administrative staff members
• Development tools such as Trade Station plugins,
  Matlab software, programming environments
• Further financing to increase our size and speed
• Investment bank in Malta bank would multiply
  our speed and opportunities 100 times with FATS
  project

27