For a third-party trading software developer, the key success factors for software development are as follows: First, a user-friendly interface is really important, which includes ease of use, easy to learn and the extensibility to meet varying client demands. A low latency system is also required, which is quite a common requirement for most traders, but the system should still have a strong risk control function designed specifically to meet different requirements of both Chinese and foreign governments and regulators.
Systems should also be highly integrated in order to provide multiple products on one platform so that traders are able to trade a range of financial products and markets that may be in different countries. In addition, one important factor, at least for Chinese customers, is the cost effectiveness of the software. Foreign software developers claim that they can provide superior services than Chinese local software, which could save time and money in long-run for they have more experience in developing advanced trading software. However, as Chinese customers are very price-sensitive and have high requirements for confidentialty, they may actually develop their own trading system.
Finally, there are large requirements around data access. The cost to access to data should be low and the correctness of the data should be important. After all, data management is quite crucial for many clients especially quant funds.
The second main topic of the conference was focused on the very timely issue of China’s reform. One expert from Peking University claimed that, if the China’s economy will be successful, there are six main themes:
- Economic structural reform – upgrading labor, resource and capital intensive industries to innovative and technology-focused industries; non-governemental service and manufacturing industries should also be a focus point; market driven economy
- Encourage innovation
- Sustainable economic development – implying that the physical environment will be more of a focus and a necessary consideration for firms as they expand.
- Reform of the social security systems, which implies big potential for the transformation of the current pension fund industry, medical insurance related industries, etc.
- Reform the fiscal system including increasing the proportion of spending on eduction, science and social insurance.
- Global integration – more open market – fewer barriers to entry. E.g. introducing foreign hedge funds into China could help the development of Chinese hedge funds inudstry, which is thought to be mutual-beneficial to both Chinese funds and foreign funds.
This was certainly not to say that these were the only two topics discussed, there were many others including machine VS human training, SNS sentiment analysis and the development of Chinese assset management industry especially hedge funds industry.
Also, as the event was sponsored by the Hongkou government, there was a strong emphasis on the Hedgefund Park that has been setup in Hongkou where the Battle of the Quants was held. This itself is an interesting development that we will look at in the coming weeks and a strong indication in the opportunities for and focus on hedgefunds as an integral part of China's developing financial industry.