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December 23, 2008

Lightspeed mulls expansion into FIX

Lightspeed Trading is considering the addition of a FIX converter to its algorithmic trading product, enabling customers to come on board without having to make changes to their existing trading applications. However, persuading customers to actually engage in a rewrite for full HUBB functionality will be more of a challenge, and one that Lightspeed will need to tread carefully to address.

By CBR Staff Writer

Lightspeed Trading, a provider of trading technology and brokerage services, has two sides to its business. Firstly, its Electronic Trading division, which provides clients with access to the Lightspeed Trading Platform, is a direct market access trading platform that enables clients with electronic-based trading strategies to enter and execute equities, options and futures trades from a single trading screen. The other aspect of Lightspeed’s business is the Algorithmic Trading division, which through its HUBB Automated Trading Solutions operation offers low latency, high throughput technology through which traders can execute high frequency algorithmic or black box trading strategies. The Lightspeed Trading Platform already offers trading in equities, options and futures, while the HUBB business is currently specific to equities.

Lightspeed has already extended its Electronic Trading division with a less customized, more ‘vanilla’ service for customers which it acquires via its website (as opposed to those which it acquires through its more personalized, institutional channel). The putative extension of the HUBB service into trading with the FIX protocol follows a similar rationale.

Of course, HUBB runs its own proprietary protocol which is, in essence, predicated on being faster than FIX. As such, adding a FIX capability (presumably through some form of FIX converter with the HUBB protocol still running in the core) would be a clear attempt at broadening Lightspeed’s addressable market, seeking to appeal to people working with FIX today. The idea is to get them onboard with a service that is FIX at the edge and HUBB at the core and then, hopefully, upsell them to an all-HUBB service. That last step, however, will entail a degree of rewriting of their application to the proprietary protocol.

This move will be part of a broader process of enhancing and expanding the reach of both of Lightspeed’s product/service offerings. On the algorithmic trading side, there are also plans to extend the platform to handle other asset classes and the potential for a capability at the front end for automating strategies for back-testing (along the lines of what TradeStation does for the less intensive retail traders with its proprietary EasyLanguage technology).

On the electronic trading side, meanwhile, Lightspeed is in the process of expanding its current options offer beyond Level 1 options (i.e. puts and calls) to enable complex order entry and Level 2 (quotes and more sophisticated strategies). Furthermore, on both sides of the Lightspeed business, the company wants to expand geographically from its current US market focus. The first new geography is Canada, but Lightspeed also wants to target Europe and Asia Pacific over time.

Rik Turner

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