Rithmic R Trader Pro: R BASS

Rithmic R BASS
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4.2

Summary

Rithmic has recently released what they describe as “the ultimate scalping tool.” What is it?

In a nutshell, R BASS is a scalping tool that specifically looks for market inefficiencies on a millisecond time frame. It attempts to capture ‘free ticks’ when the BID/ASK widens to a user-defined threshold.

TradingSchools.Org tested and observed the product in real time, with a live trading account. The results were excellent. Maybe even too good to be true.

This is a high-frequency trading product specifically designed for the retail trading community. The first of its kind available to retail traders, and available exclusively through Rithmic R Trader Pro.

Rithmic Trading: trading technology you know little about

Thanks for reading. Today I want to talk about Rithmic trading and a piece of trading technology that they have recently released to the retail trading community.

Most people that trade futures contracts have heard the name ‘Rithmic’ but they have little idea what the company actually does. Most folks are aware that Rithmic provides exchange connectivity, and that they must pay a typical fee of .25 cents per trade to have their futures trades routed over the Rithmic network.

What exactly does that mean? In a nutshell, Rithmic is a highly sophisticated financial plumber. When you place an order with your broker, the order must be sent to the exchange for execution. This is the primary business model of Rithmic–executing trades.

Currently, Rithmic processes about 25% of all futures contracts through their electronic routing system. Dig deeper and this system very much resembles a bunch of sewer pipes that process electronic ‘stuff.’ Moving electrons from point A to point B.

Dig deeper still, and you discover that this financial plumbing is highly sophisticated, and requires extreme competency. The fortunes of traders are made and lost as electrons quickly move orders across the pipeline.

Jonathan Walden and Eric Aversa of Rithmic

In the past three years, I have had several interviews with Jonathan Walden and Eric Aversa of Rithmic. The company is headquartered at 1 Ramland Road, Orangeburg, New York.

Jonathan Walden is the President and founder of Rithmic. Hardly anyone has ever heard of him. But he touches the lives of many people, every single day. If you imagine for a moment the amount of commerce and trade that is executed across the Rithmic platform–its mind boggling. In many ways, his company plays a huge role in global commerce. Whether it be wheat and soybean futures, the trading of government debt, Forex futures or stock index futures.

The amount of wealth that travels across the Rithmic pipeline amounts to BILLIONS of dollars, each and every week. It is a huge responsibility. Quite literally, the destiny of nation-states rides across the Rithmic pipeline. I find it pretty amazing that the Rithmic fingerprint can be found on nearly every commodity that we consume daily.

Jonathan Walden should also be considered one of the ‘founding fathers’ of electronic trading. Twenty-five years ago, nearly all trading was conducted through an antiquated system of paper cards, telephone conversations, hand signals, and punch cards. Obviously, much has changed. And Jonathan has been there for it all. In fact, Jonathon designed the electronic trading system for Chase Manhattan Bank that revolutionized how government debt is traded.

After Chase Manhattan Bank, he next moved to Morgan Stanley where he served as the chief architect and lead developer for the bank’s real-time ticker plant. When traders were still screaming at each other on the floor of the NYSE, Jonathan was behind the scenes developing an electronic system that would eventually put the floor traders out of business.

Jonathan Walden is a brilliant guy. He has made full use of his degree in Applied Mathematics from Columbia University.

Eric Aversa is the longtime Director of Operations at Rithmic. He has worked many years with Jonathan and should also be considered an electronic trading ‘founding father.’ In fact, a little-known fact about Eric Aversa is that he is a Fulbright Scholar. This is an elite group of people that include 54 (Fulbright Scholars) being awarded the Nobel Prize.

Yes, I am beating the drum pretty loudly regarding Jonathan Walden and Eric Aversa. But the simple truth is that these guys have spent hours on the phone with me, teaching me the history of electronic trading, and explaining how this stuff works. I personally consider it an honor that they have reached out to me and asked to write something about the Rithmic trading platform.

Worlds worst marketers

First things first. Both Jonathan and Eric are the worlds worst salesman. Neither of these guys could sell free beer to a homeless drunk.

These guys are motivated by technology and making stuff work. Marketing is something totally foreign to them. I am sure these guys couldn’t give away free candy on Halloween. Even the slightest hint of salesmanship and they scurry for cover.

When Jonathan asked me to write about several new pieces of technology that they recently released to the trading community…I jumped at the opportunity. No, I am not being paid. I just want the audience to be aware of something that has traditionally only been available to the ‘market maker’ class. In fact, as far as I know, this is the only trading product of its kind where a retail trader can leverage a technological rocket ship. So what is it?

Introducing R BASS

Jonathan Walden describes R BASS as the “ultimate scalping tool.” The tool is trademarked and available exclusively on the R Trader Pro trading platform.

Most retail futures traders opt for one of the more common futures trading platforms, like Ninja Trader, Trade Station, eSignal, Trade Navigator, just to name a few. However, the R Trader Pro is Rithmic’s retail trading platform. And hardly anyone knows about it. Currently, the R Trader Pro platform costs about $50 per month.

So what exactly is R BASS, this “ultimate scalping tool?” Sure sounds another piece of baloney, right? Well…its not. In fact, I have never witnessed anything quite like it. Let me explain.

Have you ever stared at a trading DOM, or trading ladder and noticed those very brief instances where the spread between the Bid and the Ask widened? Dont you wish you could grab that free tick? Well, that is exactly what R BASS does…when the spread of a security widens by a certain threshold, the R BASS program ‘jumps to the front of the line’ and effectively steals the free tick.

Ever noticed in crude oil futures contracts how the spread is usually 1 tick? But every once in awhile the spread widens to 2 or sometimes 3 ticks? R BASS is a systematic program that looks for these specific micro-moments and ‘steals the tick.’

How well does R BASS work?

For testing purposes, Jonathan set up a screen sharing session where we tested R BASS for a trading day. We specifically instructed R BASS to look for instances where the crude oil futures

Typical Trading DOM

Typical trading DOM or price ladder.

contract BID/ASK spread widened by 3 ticks or the Emini DOW futures contract widened by 2 ticks. We set the profit target at one tick.

Honestly, I didn’t believe that today’s modern electronic markets still contained much inefficiency. But Jonathan completely disagreed. As he explained, “much is happening, but your eyes are too slow to actually see it.”

And so what happened next was pretty fun to watch. With the crude oil market, we didn’t catch any free ticks. However, with the Emini Dow futures contract…this handy little program started popping like microwave popcorn. A tick here, and a tick there, ping ping ping a few more ticks.

As I sat there and watched, I thought to myself…this seems too good to be true. Why isn’t he doing this himself and making a mountain of “free money?” as Jonathan explained, “Look, I just make this stuff and I make plenty of money.”

What are the downsides or drawbacks? The HUGE RISK is that you get caught on the wrong side of a surprise event. Suppose you get filled for a ‘free tick’ but the very moment you get filled, the market springs against you? You just gave away all of your daily profits. Think it won’t happen? Guess again. With financial markets, there is no free lunch.

However, this new tool presents a new universe of potential opportunities. Let me explain…

Hunting for inefficiencies

The root purpose of R BASS is hunting for inefficiencies. Looking for those micro-moments where the BID/ASK spread widens by a certain threshold. And then it attempts at being a liquidity provider or market maker. In a nutshell, this is all R BASS really does. It introduces efficiency when the market becomes momentarily unbalanced. It actually happens more than you know, but your eyes are simply too slow to observe the event.

Considering the large amount of exchanges in which R BASS can be deployed, you can use your imagination on how to actually deploy such a tool.

However, keep in mind that R BASS is a new trading tool. And it has the potential of automating your trading account into oblivion. You are instructing a robot to trade on your behalf. It has no idea if a major news event is about to break. Or a war suddenly breaks out. Or the Fed suddenly, and unexpectantly raises interest rates. These are all moments where you could have your ‘head handed to you.’ So with an abundance of caution, I want you think about the risks.

Not “retail trader” friendly

Another problem is that the R Trader Pro trading platform is not retail trader friendly.

The learning curve should be considered steeper than most. I spoke with Jonathan about this, he replied: “We are interested in creating tools and networks that provide our customers with a real edge.” And, “We are not interested in the technical analysis mumbo jumbo.” (though it is included in R Trader Pro)

Essentially, the R Trader Pro platform has been built to give the retail trader the fastest and most technically advanced piece of software on the market. If the Rithmic network were a hand, then the Rithmic R Trader Pro software would be the glove that perfectly fits the hand. Not a pretty glove. But a work glove.

Thanks for reading. In the future, I will be writing about more about the features that are exclusively available on R Trader Pro.

If you would like a free trial of R Trader Pro, you can download it here.

Don’t forget to leave a comment, would love to read about your opinions and thoughts.

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30 Comments on "Rithmic R Trader Pro: R BASS"

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Joao
Guest
I’ve been chewing on this article for a week. It goes contrary everything I know about spreads. First, if the spread widens, then your trade is immediately underwater by the same amount as the wide spread. Second, how does the system decide which direction to bet on? Third, when spread rolls back to normal, your trade will be either losing or winning. If losing, it will wait awhile to get your trade in profit and get out. If winning, it will get out immediately. (This is also true if your trade is entered at normal spread.) The profit Emmett is… Read more »
Tom Martin
Guest

@Emmett, I spoke with Jonathan today regarding R BASS. He mentioned a couple of things I wanted to get your feedback on, because as he free admits, he’s not a trader – just a programmer.
Jonathan said R BASS works best in choppy markets. You will go broke (very quickly) running R BASS in a trending market.
R BASS works best on futures with small order books – low volume but high volatility.
With all your experience, do you agree?

Joao
Guest

If your scalp one tick on why YM at five dollars a tick, how do you make money after commissions and exchange fees?

Tom
Guest

Or, maybe the better question is, Why would you be risking only one contract?

Chris
Guest

Hi Emmett,

The question begging to be asked is:

If this interface/software was as good as you profess….why would you publish it on the site?

I get that the Rithmic crew is probably making some serious coin already but maybe keep this little find to yourself?

Simon Watson
Guest

Is there a way to subscribe or test drive Rtrader Pro without an introducing broker? their website is not too clear on how to get started.
Also in the article you mention that the software in that instance was “instructed” to look for discrepancies, is it some form of programming language that is used to configure the scalp parameters or a simple gui interface?

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