I am looking for details about the High Performance Arbitrage
Detection & Trading (HAT) project.
I found the following links:
http://www.cordis.lu/esprit/src/22696.htm
http://www.itwm.fhg.de/fm/projects/arbitrage/arbitrage_eng.html
http://www.prosoma.lu/cgi-bin/split.py?opt=flat&id=1353&page=description
Those links do not provide much information about the project, I need
more.
Kind of questions that are of interest: 
Was HAT project completed? Was it implemented as a commercial system?
How
efficient are techniques for arbitrage detection, and how usable are
the
results? What kind of hardware was used? Etc...
Will also accept contact information of people who worked on this
project (except those who appear on the above pages).
Will pay $20 in tips for valuable info.

---

Request for Question Clarification by vitalmed-ga on 28 Nov 2002 20:00 PST

Hello littleboy-ga

Let me update you on my research thus far. The project was officially
completed, which we know first, according to the links that you
provide indicating that is was finished in 1998, 24 months after its
launch. This was corroborated by one of the contractors listed, with
whom I spoke. He said that the final product of the work was a
prototype, and although the next stage was intended to be further
development, nothing commercial resulted. In his words, they found it
was "an interesting idea" but the product was essentially "some
spreadsheets" and "nothing special". He believed that no intellectual
property had resulted directly from the project. The people who worked
on the project, he said, went afterwards in different directions with
their own pursuits, some of them in various locations in Europe. Some
of them may have incorporated some of the ideas of the project into
their own work.

I also followed an independent path based on the stated intention of
the project to produce "an add-on product to the suite of tools
offered by Reuters Triarch/SSL platform in the financial sector."  A
clear connection was difficult to identify between the HAT project and
intellectual property, but a search of U.S., European, and global
patents revealed a patent of Reuters, entitled  "ELECTRONIC TRADING
SYSTEM INCLUDING AN AUTO- ARBITRAGE FEATURE OR NAME SWITCHING
FEATURE".  The inventors were Rosalyn S. Wilton and David L.
Silverman.

This patent is summarized as follows:  An electronic trading system
includes a plurality of trader terminals for receiving credit
parameter data, arbitrage parameter data, and trading data from a
trading entity and displaying trade information to the trading entity.
The trading data includes bid and/or offer information input by the
trading entity. The system further includes a computer connected to
the plurality of trader terminals via a communications network which
receives and stores the credit parameter data and the trading data
from the plurality of trader terminals. The system also includes a
detector circuit or program for automatically detecting an available
arbitrage opportunity including a plurality of trades based on the
credit parameter data, the arbitrage parameter data, and the trading
data; and a circuit or program for automatically executing the
available arbitrage opportunity by executing all of the plurality of
trades. A similar electronic trading system includes an automatic name
switch feature wherein the plurality of trader terminals receive name
switch parameter data, credit parameter data, and trading data from
the trading entity. A circuit or program automatically detects and
executes available name switch transactions based on the credit
parameter data, the name switch parameter data, and the trading data.

I made contact with Cordis, the "Community R&D Information Service", 
the central information source for European research programs, and was
directed to the primary contractor for further information, in this
case Horst Luhrens of Dresdner Bank in Frankfurt, Germany. I sent a
note of inquiry to a representative of the Bank who is in New York,
and am awaiting their reply. I am also awaiting replies from two other
persons associated with the project.

Dr. Dieter Homeister, a computer scientist, who was with University of
Heidelberg, lists on his home page that he worked on the HAT project.
See: http://www.iwr.uni-heidelberg.de/~Dieter.Homeister. The e-mail
addresses listed for him there do not seem to be current. His newer
web page is
http://www.uni-mannheim.de/rum/members/homeister.html. E-mail there
too has thus far not gone through.

The same synopsis as one of the links you note is available by ftp in
book of the Espirit projects at
ftp://ftp.cordis.lu/pub/esprit/docs/projhpcn.pdf. The information on
the relevant page seems to be the same as one the links you listed.

Pursuing one other angle brought me to a company that produces
software described as "a real-time ADR arbitrage monitor for Reuters
datafeeds (Tibco or Triarch)  featuring real-time currencies and
conversions, configurable fees and settlement dates, customizable
layouts, and shared worksheets".  This might have seemed to be related
to the objectives of the HAT project, but the President of the company
indicated that it was not. Perhaps information about this software
company and the product will interest you, and I shall send it along
if so.

In summary for now, no clear outcomes of the project are apparent, and
the work of the HAT consortium seems not to have continued beyond the
prototype mentioned by the contractor I spoke to. Nevertheless,
software and intellectual property exist that seem to pertain to
similar purpose to the intended goal of the project. Possibly the ones
identified or others were indirect results of the HAT program, but I
have discovered at this stage no direct connection. Program contacts
have been sent inquiries, and we shall see what type of response they
provide.

Will the above in addition to any further information that I find be a
satisfactory answer even though it suggests that no direct link exists
between the HAT project and commercialized products or intellectual
property?

I shall let you know in any case if I receive further or any different
information from the other original program contacts.

Vitalmed=ga

---

Clarification of Question by littleboy-ga on 30 Nov 2002 21:43 PST

Hello vitalmed-ga!

You've done a serious piece of job, thanks!

As of your query...
Basically, I asked about this specific (HAT) project, because it was
the closest case to what I had on my mind, among all what I've found
searching the web. My primary point of interest in this question was
any information about the results of this project: how
efficient/usable it was, how accurate was the output, was it ever used
for practical goals (trading), any technical info, etc.

As I can understand from the info you've gathered so far, no such data
exists.
Well, no information is an information, too.
I also wrote several emails to several people, and the only clear
information I received was that there is NO data on web regarding this
project.
The patent data sounds very interesting.
Any information about similar projects/systems would be greatly
appreciated.

Regards,

littleboy-ga

Dear littleboy-ga,

Thank you for your feedback. A productive path to follow regarding
similar applications might be those developed for or by Reuters, as
the HAT project was at least originally intended to be an add-on for
Reuters Triarch products.  Further information about the "PCT" or
World Intellectual Property Organization (WIPO) patient number WO
9722072 that I identified and is found in the Derwent World Patent
Index follows below.

Also, Xyris Software, Inc. (www.xyris.com) indicates that it
"specializes in real-time Windows software development for financial
institutions", at least some of which connect to the Reuters/Triarch.
An apparently free trial version of one its products that seems to be
relevant and called, "RADAR", an "ADR Arbitrage Monitor", can be found
by clicking "Products" from its home page, and scrolling down. Contact
information is there also, at www.xyris.com/contacts.htm.

Contacts seem to be obscure at the Espirit program and at the Dresdner
Bank, HAT's primary contractor, but I shall be pleased to update you
if I do hear of anything. In any case, this research opened up a
subject that seems intriguing, and I hope the information serves you
well.

Thank you for the question. Call on me and Google Answers researchers
again some time!

vitalmed-ga


ELECTRONIC TRADING SYSTEM INCLUDING AN AUTO- ARBITRAGE FEATURE OR NAME
SWITCHING FEATURE
SYSTEME DE COMMERCE ELECTRONIQUE A FONCTION D'AUTOARBITRAGE OU
FONCTION DE COMMUTATION DE NOMS

Patent Applicant/Assignee: 
REUTERS LIMITED, 
Inventor(s): 
WILTON Rosalyn S, 
 SILVERMAN David L, 
Patent and Priority Information (Country, Number, Date): 
Patent: WO 9722072 A1 19970619 
Application: WO 96IB1479 19961212 (PCT/ WO IB9601479 ) 
Priority Application: US 95571106 19951212 
Designated States: AL AM AT AU AZ BA BB BG BR BY CA CH CN CU CZ DE DK
EE ES FI GB GE HU IL IS JP KE KG KP KR KZ LC LK LR LS LT LU LV MD MG
MK MN MW MX NO NZ PL PT RO RU SD SE SG SI SK TJ TM TR TT UA UG UZ VN
KE LS MW SD SZ UG AM AZ BY KG KZ MD RU TJ TM AT BE CH DE DK ES FI FR
GB GR IE IT LU MC NL PT SE BF BJ CF CG CI CM GA GN ML MR NE SN TD TG
Main International Patent Class: G06F-017/60 
Publication Language: English 
Fulltext Word Count: 9266 

English Abstract 
  An electronic trading system includes a plurality of trader
terminals for receiving credit parameter data, arbitrage parameter
data, and trading data from a trading entity and displaying trade
information to the trading entity. The trading data includes bid
and/or offer information input by the trading entity. The system
further includes a computer connected to the plurality of trader
terminals via a communications network which receives and stores the
credit parameter data and the trading data from the plurality of
trader terminals. The system also includes a detector circuit or
program for automatically detecting an available arbitrage opportunity
including a plurality of trades based on the credit parameter data,
the arbitrage parameter data, and the trading data; and a circuit or
program for automatically executing the available arbitrage
opportunity by executing all of the plurality of trades. A similar
electronic trading system includes an automatic name switch feature
wherein the plurality of trader terminals receive name switch
parameter data, credit parameter data, and trading data from the
trading entity. A circuit or program automatically detects and
executes available name switch transactions based on the credit
parameter data, the name switch parameter data, and the trading data.

FIELD OF THE INVENTION
 The present invention relates to an electronic trading system which
automatically identifies arbitrage opportunities created by
credit-related discrepancies within a market and optionally
automatically executes the appropriate trades, thereby enabling a
trading entity to extract low-risk trading profit from the market .

 The present invention further relates to an electronic trading system
which automatically and instantaneously enables less credit-worthy
trading entities in a market to trade using the credit lines of more
credit-worthy trading entities in the market , thereby creating
additional market liquidity.

 BACKGROUND
 In electronic trading system for markets in which credit risks and
settlement risks are born by trading parties, the trading parties
input credit lines into the trading system which are used to limit a
trading entity's exposure created by transactions with other trading
entities on the system. For example, by entering a low or zero credit
line for a particular trading counterparty, a trading entity prevents
most or all potential trades between itself and the potential
counterparty. Thus, by adjusting a counterparty's credit line, a
trading entity may limit its gross or net exposure (outstanding risk)
based on transactions with individual counterparties and its total
exposure to all counterparties.

 in a matching system which enables trading entities to enter credit
limits, such as those described in U.S. Patent No. 5,136,501 and U.S.
Patent No. 5,375,055, the credit parameters input by the trading
entities may result in situations in which a first trading entity,
trading entity S 1 . enters an offer which matches a bid entered by a
second trading entity, trading entity S2, but the system will not
execute the trade because either trading entity S 1 has not extended
sufficient credit to trading entity S2, trading entity S2 has not
extended sufficient credit to trading entity SI, or both. Otherwise
stated, there is insufficient bilateral credit availability between
trading entity SI and trading entity S2. Notably, the trading entities
may be individual banks and trading institutions and/or groups of
banks and trading institutions, Similarly, trading entity S2 may enter
a bid with a higher price than an offer entered by trading entity SI.
Again, SI and S2 cannot trade with one another because there is
insufficient bilateral credit availability between the two. In this
instance, an "arbiWge" opportunity exists in that a third party,
trading entity S3, which has sufficient bilateral credit with both
trading entity SI and trading entity S2, may buy from S 1 at a low
price and sell to - 2 S2 at a higher price, thereby obtaining an
immediate, low-risk profit due to the credit discrepancies in the
market .

 The known electronic trading systems do not provide any means for
automatically identifying an arbitrage opportunity created by credit
discrepancies in the market and optionally automatically executing the
appropriate transactions, thereby enabling trading entity S3 to
automatically, efficiently and effectively capitalize on the arbitrage
opportunity and increasing the liquidity of the market without the
addition of new bids and offers. While the system described in U.S.
Patent No. 5,375,055 displays the best available offer and bid prices
to market makers, thereby indicating that an arbitrage opportunity
exists when there is a discrepancy between the two prices displayed,,
the @ 055 system does not provide any means for automatically
identifying and/or capitalizing on the arbitrage opportunity.
Furthermore, the known trading systems do not provide any means of
ensuring that all trades needed to successfully complete the arbitrage
transaction will occur prior to executing any of the trades such that
trading entity S3 does not incur the risk of only one side of the
arbitrage transaction being executed.

 A related drawback of known electronic Wading systems which
accommodate markets in which the trading entities bear a credit and/or
settlement risk is that these systems do not provide a means by which
a less credit-worthy Wading entity, trading entity S4, may trade with
other trading entities using the credit line of a more credit-worthy
trading entity, For example, if trading entity S4 enters a bid which
is compatible with trading entity S2's offer, but trading entity S2
has not extended sufficient credit to trading entity S4, no
transaction could occur in the known trading systems. However, if
trading entity S4 were able to use another trading entity's (e.g., Si
or S3) credit line to complete the transaction (assuming that trading
entity - 3 S 1 or S3 has sufficient credit with trading entity S2 and
S4) through an agreement between trading entity S4 and trading entity
S1 or S3, the liquidity of the market would again be increased. This
uname switch' procedure may be instantaneous (no discretion option is
provided) or may be implemented to allow discretion of the part of the
user in the context of an electronic trading system.

 The practice of name switching in which one party trades under the
credit lines of another party may currently be accomplished through
the use of a broker. However, there are presently no electronic
trading systems which can automatically, instantaneously, and
effectively perform the name switch procedure.

 SUMMARY OF THE PRESENT INVENTION
 In view of the above discussion, it is an object of the present
invention to provide an electronic trading system which automatically
identifies arbitrage opportunities arising from price anomalies that
arise due to credit discrepancies within a market .

 It is a further object of the present invention to provide an
electronic trading system which automatically and efficiently executes
the trades necessary to complete an arbitrage transaction without risk
to the trading entity, or automatically provides a trading entity with
the option to initiate the arbitrage trade.

 It is another object of the present invention to provide an
electronic trading system which is capable of performing an automatic,
instantaneous name switch operation whereby a less credit-worthy
trading entity uses the credit lines of a more credit-worthy trading
entity to execute a desired transaction which would not be otherwise
available to the less creditThe auto- arbitrage and name switch
features have different purposes and address - 4 different needs
within a market , The auto- arbitrage feature addresses the need for a
means of enabling a trading entity to automatically and effectively
avail itself of arbitrage opportunities without incurring significant
risk. The name switch feature is a function of the commercial
relationships between trading entities, whereby one entity utilizes
uses the credit lines of another entity to obtain trades and
compensates the other trading entity for the use of its credit lines.
However, both features are implemented through similar functions
provided within an electronic trading system.

 An electronic trading system having an auto- arbitrage feature
according to the present invention includes a plurality of trader
terminals for receiving credit parameter data, arbitrage parameter
data, and trading data from a trading entity and displaying trade
information to the trading entity. The trading data includes bid
and/or offer information input by the trading entity. The system
further includes a computer connected to the plurality of trader
terminals via a communications network which receives and stores the
credit parameter data and the trading data from the plurality of
trader terminals. The system also includes a detector circuit or
program for automatically detecting an available arbitrage transaction
including a plurality of trades based on the credit parameter data,
the arbitrage parameter data, and the trading data; and a circuit or
program for automatically executing the available arbitrage
transaction by executing all (or none) of the plurality of trades.

 An electronic trading system having a name switch feature according
to the present invention includes a plurality of trader terminals for
receiving credit parameter data, name switch parameter data, and
trading data from a trading entity and displaying trade information to
the trading entity. The trading data includes bid and/or offer
information input by the trading entity. The system also includes a
computer connected to the plurality of trader - 5 terminals via a
communications network, wherein the computer receives and stores the
credit parameter data, the name switch parameter data, and the trading
data from the plurality of trader terminals. A circuit or program
automatically detects available name switch transactions based on the
credit parameter data, the name switch parameter data, and the trading
data, and automatically executes available name switch transactions.

 The electronic trading system according to the present invention is
designed to take advantage of arbitrage opportunities that exist in a
market due to credit discrepancies between the parties. This type of
arbitrage is distinguishable from more traditional arbitrage in which
price discrepancies are created by friction within the functioning of
a market , such as the logistics of completing and settling
transactions. This type of arbitrage can be eliminated as markets
become more efficient. However, arbitrage opportunities based on
credit discrepancies as addressed by the present invention will always
exist because not all trading entities are willing to extend the same
amount of credit to all other trading entities.

 Also, the intra- market type of arbitrage accommodated by the system
according to the prewnt invention is distinguishable from inter-
market arbitrage , for example, 'spread' trading in commodity futures
markets. Systems that accommodate spread trading, whereby, for
example, a party trades one contract month for another contract month
of the same commodity ('calendar spreads') or one commodity for
another commodity, are known in the arL For example, the GLOBEXrO
trading system developed by Reuters Limited of Iondon, England
accommodates these types of inter- market trades.

 Various additional advantages and features of novelty which
characterize the invention are further pointed out in the claims that
follow. However, for a better understanding of the invention and its
advantages, reference should be made to the accompanying drawings and
- 6 descriptive matter which illustrate and describe preferred
embodiments of the invention.

---

Clarification of Answer by vitalmed-ga on 08 Dec 2002 06:47 PST

Dear littleboy-ga,

Some further information has just come in from a person who is
referenced on one of the sites you gave,
ttp://www.itwm.fhg.de/fm/projects/arbitrage/arbitrage_eng.html, that I
thought to add for you.

The source is a subcontractor of Dresdner Bank, on this project. He
informs me that nobody that was involved in the project is still with
the bank. Some partners and one of the participants who was with the
London Business School planned to start a firm called "New Sciences".

The first models tested were the classical, existing, arbitrage
opportunities. Then one share was compared with a basket of shares.
Arbitrage was found to be possible if the sign of the difference of
the prices changed. This worked better for the stock market than for
the fixed income market. He said that a system was developed that
implemented the models and which provided a signal on Reuters
information system. This system was running in a test environment at
Dresdner Bank in Frankfurt.

He corroborated the fact that little information is available on the
internet other than the sites noted and that no reports of the project
are found.

I hope this and the previous information posted provides you with what
you need. Feedback is always welcome.

vitalmed-ga

As I've never heard of the project you referenced I don't know how to
help you directly.

I am aware of a pseudo open source trading platform project that has a
real time arbitrage trading "module" that's already fairly
sophisticated. If the pre-built module doesn't suite you, you can use
it as a base to build something like the HAT model.

http://www.smartquant.com

Hello littleboy-ga,

I have made progress on a few fronts. First is a list of the prime and
six other contractors that worked on this project, which as you may
know, was sponsored by Espirit, the Information Technologies program
of the European Commission. The links you provide indicate the program
was completed December 31,1998, 24 months after its commencement.

I have submitted a request to the sponsor for verification that it was
completed and for the additional information you are seeking. One of
the persons who worked on the project was a computer scientist who was
located at the University of Heidelberg, and I await to hear his
response regarding a request in to him also for further information.

The technique seems to be implemented as an add-on product to Reuters
software, which I think I have located as well as the associated
patents.

I shall research further and send you all of details that I can
verify.

Thank you for your patience.

vitalmed-ga