Benjamin “Ben” Chesir, the new President and Chief Operating Officer of Quantitative Alpha Trading talks with the Opportunist’s Managing Editor Leslie Stone about his company’s proprietary securities trading systems.
For more than a decade, Quantitative Alpha Trading or QAT (formerly known as RTN Stealth Technologies Inc.), has been researching, developing and maintaining proprietary algorithmic securities trading systems that operate across numerous financial markets. Relying on behavioral science patterns, the Company’s proprietary systems use a linked series of computer programs to analyze securities market data in real-time and directly execute buy or sell orders over the electronic securities exchanges while monitoring the status of every trade within a given portfolio—without human intervention.
Opportunist: Tell us about your background Ben.
Ben: While in New York, going for my master’s degree in finance, I became intrigued by the financial markets. So I took an internship at Credit Suisse, writing visual basic programs to automate their foreign exchange business using digital market data embedded in trading models. After that, I began a career in earnest at Merrill Lynch first as a software developer and became involved in designing and implementing some of the first real-time trading models used across the firm’s institutional trading desks. Noticing that the listed derivatives markets were beginning to go electronic at that time, and anticipating an acceleration of that trend— my focus turned to trading and money management with technology as a cornerstone. As such, I worked as a derivatives sales trader at Merrill exposed to and participating in the universe of tradable instruments and asset classes in markets everywhere. Eventually my team moved to ABN AMRO and I took a senior role building our derivatives risk infrastructure and running our North American risk management group, a position also held most recently at Citi protecting and growing those firms’ futures and OTC cleared businesses. I left ABN to join the New York Mercantile Exchange as head of new product development participating in the automation and expansion of that marketplace and eventual sale of the exchange and clearinghouse to the CME Group. At the conclusion of that deal, I moved to OTC Global Holdings as chief development officer, helping that firm develop and distribute their electronic trading platform to institutional clients and brokers in anticipation of Dodd-Frank regulatory changes relative to Over-The-Counter derivatives trading.
Opportunist: You certainly witnessed the evolution of financial market technology first hand.
Ben: Yes, but I’ve always been a firm believer that technology is a means rather than an end. QAT allows me to realize that by putting traders in front of great technology that can help make them better traders and generate alpha, or returns, using various models that we have developed. I am excited to join an entrepreneurial firm such as QAT, with its tremendous technology platform.
Opportunist: So, when you talk about alpha, are you referring to investments that make money?
Ben: Well, our objective is to effectively put this software in the hands of successful traders who have demonstrated good track records and can produce attractive risk adjusted returns.
Opportunist: How do you find these traders?
Ben: We have a selection process and we use various degrees of due diligence to determine who the perfect candidates would be. The software is used internally only and not available to the general public. There are about 10 traders currently active with the system and we obviously will look to grow that number aggressively as the months pass. We believe it has potential for much larger distribution and our hope is to have thousands of trader-subscribers throughout the world. We will be executing joint ventures with multiple organizations as well as developing investment funds for broad distribution.
Opportunist: Can you tell us about QAT’s systems?
Ben: They are extremely proprietary and we need to keep the core of what we do confidential but, from my point of view, QAT uses artificial intelligence at the center of its trading strategies. It leverages a one-of-a-kind robotic tool, called the Stealth Trading System, and various “black box” software trading models that use sentiment indicators to signal opportunities throughout the trading day.
Opportunist: What differentiates QAT from other software trading systems on the market?
Ben: It does more than simply follow trends or technical analysis. It actually measures market “sentiment” observed in a variety of asset classes (stocks, commodities, currencies etc.) using homegrown software developed by our team of engineers. Essentially, we use a series of linked computer programs and proprietary software to analyze trader behavior in financial markets and determine the best entry and exit points for the securities it is following.
Opportunist: What kind of data does it analyze?
Ben: It relies on behavioral science patterns to analyze financial market data in real-time and directly execute buy or sell orders over the electronic exchanges. The status and progress of every trade within a given portfolio is monitored and decision making variables adjusted with live market movements. This is done both with and without human intervention depending on the precise strategy in use.
Opportunist: How so?
Ben: It’s based on being able to read people and use the logic that the typical floor trader might anticipate in trying to determine which way to place himself, based on his observations of others. We view it essentially as the electronic identification of a persistent trader mentality that has manifested itself in markets for centuries.
Opportunist: Where does QAT market its products?
Ben: We are actively deploying it now in New York and Toronto, to institutional money managers, professional traders and hedge funds. We are pursuing software licensing agreements and joint venture engagements with different investors and trading groups. But it’s not come one, come all by any means.
Ben: We have found something in the data that others have overlooked. [Laughs] I also consider our people a competitive advantage. Rolling out a high performance racecar is good but it’s far better to have a highly competent driver behind the wheel. Let’s put it this way, you can give someone the most advanced laser scalpel in the world but that doesn’t make him a neurosurgeon. We are very careful about the people we put in place and the tools we put in their hands. We have a well-seasoned group and our business is creating financial results.
Opportunist: Does the company have any kinks to work out?
Ben: One area, which constantly needs development, is connection to various exchanges. Keeping ahead of the curve of connecting—and with faster speeds—is something that constantly requires developing, but the core of the system and the algorithms have been in development over the past 10 years.
Opportunist: What do you predict for the future of QAT over, say, the next five years?
Ben: Well, as a company we obviously would like to see everyone involved get a decent return on their equity and of course create shareholder value. From a tech point of view, we want to set a standard of how people look at the market—a mainstream way of trading the market. I hope to ignite more curiosity among traders and provide a significant edge to our partners. The feedback has been overwhelmingly positive and we truly believe five years from now we will have a significant following of a new generation of traders and financial market theory deployed globally in every major market.
Visit QAT Online: http://quantitativealphatrading.com/
Leslie Stone is an award-winning writer/editor with more than two decades of experience covering business, finance and lifestyle issues for newspapers, magazines and online publications. Originally from Virginia, she currently resides in the Orlando area.