Is now the right time for open source in hedge funds?

I've blogged about Marketcetera before, a cool open-source hedge fund trading platform. Later this week I'll be posting an update after I interview the Marketcetera team, but keep bumping into stories that make me wish the interview were today, not Thursday.

For example, Businessweek recently offered up an opinion piece from a San Francisco-based hedge fund trader, who argued for an open-source trading platform:

After headcount, a typical hedge fund's largest expense item is technology. Much of that expense goes to the trading systems that we use. Let me tell you a secret: Our "secret sauce" is our trading strategies--it's not our systems for trading. These platforms can cost even a smaller fund like mine hundreds of thousands or even millions of dollars a year. Look, I just need a trading platform that executes our strategies. The software needs to connect to other systems that our different brokers and exchanges use and complete the trades driven by our increasingly automated strategies. This trading platform market is probably a $1 billion annual industry today.

It's also exactly what Marketcetera already offers. Has the Marketcetera team called this guy? I'm hoping the answer is 'Yes.'

Computer Business Review recently went into detail on the Marketcetera trading platform, calling out its high download numbers and promise for the hedge fund industry. For those who think that hedge fund traders can afford to waste money on expensive, bloated systems, this article offers good reason to believe otherwise.

In this environment, no one can afford to waste money. It doesn't grow on trees or hedge fund trading desks. But I believe Marketcetera is well poised to help hedge funds trade more efficiently and, hence, make more money with fewer resources. Yes, even hedge funds need to do more with less.

I can't wait to talk with the team later this week.

[ITRebel]

It would not work for their trade secrets involving their trading strategies, so a closed source solution is at least required for that. However, for a commodity application like executing trades, it is a possibility if we assume that the open source solution is just as fast. The problem is that some open source installations lag badly on basic benchmarks such as speed - see my earlier post on how this is a substantial problem in the R language for advanced analytics. In fact, I was at a conference a couple of years ago and the speaker said that they gave up on using R because it was so slow and actually used Fortran to solve their problem (talk about going back in time). The other problem is that many complex trading platforms involve advanced analytics, so one would need to be very careful about what open source application is employed.

[MSSlayer]

Trading strategies have nothing to do with the equipment and software used to carry them out.

[ITRebel]

MSSlayer,

As a former Commodities and Futures trading software developer and attendee at major hedge fund conferences, I would have to tell you that you once again that you are the one who is clueless. Many strategies critically depend upon speed of equipment and software. Also, if one has an effective trading strategy, then one likes to keep it a trade secret. Whether it will continue to be an effective trading strategy or something known to everybody will depend upon using a closed and secure software solution. Once again, please give specific examples because your naysaying without any information is what is absolutely clueless.