Distributed automation

How did you become involved in developing and building trading models?

The original stimulus for trading was my biochemistry professor at university who introduced me to trading soybeans. My interest grew from there and during my subsequent MBA in finance. I started building trading models in 2003 on the advice of Dr. Brett Steenbarger, so it was possible to test and verify my strategies.

What do you regard as the major challenge of building trading models?

Even for people who would classify themselves as professional traders, I think it is easy to fall into the trap of trivialising the time and effort required to build robust trading models. Significant amounts of both are needed because original thought and research is required – following the herd is simply not good enough.

Are you a programmer by training/ background?

No, so when I first embarked on developing trading models I hired a specialist programmer and a computer science student who acted as my assistant and had the task of explaining the trading requirements to the programmer. Apart from the risk of misunderstandings (my assistant did not have a trading background) we found that the trading model development platform we were using lacked many of the functions necessary for the ideas I wished to explore. This further delayed things, as it was necessary to build custom functions from scratch.

At what point did you start to consider the distribution of trading signals based upon your models?

While it was obvious that my original trading model was viable by 2002, it was not until early 2004 that I submitted it to Futures Truth for independent testing and verification, with the first results being published in autumn of that year.

How have your models ranked with Futures Truth?

The original trading system (called RC Success) was ranked number one by Futures Truth for more than eighteen months and is still in the top ten. Subsequent models have actually been better performers.

Presumably you have had offers to purchase the source code to your trading models?

Yes, some of them very substantial, but I have preferred to stick with the idea of leasing the output from the models.

How do you distribute this output?

To start with we would supply clients with an encrypted add-in that contain the trading model’s logic. Unfortunately it took a while before it became apparent that the encryption used by the development platform I was using was compromised. Hackers were able, with little difficulty, to crack the encryption and extract the model’s rules. This issue of intellectual property theft is endemic with regard to trading models, which is why security is so critical to prevent information leakage. After this initial experience we tried using a hardware encryption lock, which at first glance looked promising. However, on closer inspection it was clearly not foolproof and was at best perhaps 95% secure. Though it would certainly slow hackers, they would still be able to crack it eventually, which was obviously not good enough for our purposes. If one is looking to sell the output from a trading model, absolute security of the source code is essential. Otherwise prospective clients have very little incentive to pay a reasonable commercial price for the signals and those who have already subscribed are inevitably aggrieved. As a result, I was obliged to suspend sales of the automated trading signals.

Figure 1: StrategyRunner’s Strategy Automation Station

So how did you get around this problem?

Initially, I invested quite a bit of time and capital in trying to develop a programme that would route the orders direct to client accounts, but this didn’t work out. However, about three years ago I came across StrategyRunner, which solved all my security concerns at a stroke.

How?

The trading model source code remains entirely within my development platform, which interfaces with StrategyRunner’s Strategy Automation Station (SAS). SAS takes the trading signal output from the development platform and routes it to the StrategyRunner Server that is running at each client’s FCM’s site. The Server then executes the trades on the clients’ accounts automatically.

How much integration work was required on your part to get this up and running?

Effectively none; SAS works with a number of development platforms and it was simply a case of installing the software. The entire process took a matter of minutes before everything was fully operational.

Can the clients monitor the trading process?

They can do more than that. If they run the StrategyRunner Pro Console application they can set up defaults for the number of contracts to trade, stop losses, exits etc. They can then change these in real time if they wish – so if they have a dynamic money management strategy they wish to use, they can apply this to the raw trading signals. They can also choose to ignore signals if they wish or manually confirm them.

Figure 2: StartegyRunner Pro Console – used by Cheung’s clients to monitor/control trades triggered by his models

How has the order routing performed in terms of reliability?

No problems; it has been completely reliable. The only thing I would say is that because of the interface between SAS and our development platform it is advisable to check any changes before going into production.

By changes, do you mean changes in trading model logic?

No – changes such as updates or patches to the model development platform or upgrades to the machine on which it is running.

Did you consider any alternative solutions to StrategyRunner?

At the time we couldn’t (and still can’t) find any alternatives that were acceptable. We have subsequently been approached by a vendor keen to promote and lease the trading models, but one of their requirements was that we re-coded the models in C++. Given that the existing process is running smoothly, the additional effort required to do this didn’t seem worthwhile. We have simply found that using StrategyRunner has been reliable and secure.

Which markets do your models cover?

They are specifically intended for the e-mini S&P future, but the same basic principles (obviously with some adjustment for differing volatility levels) are also applicable to the Dow, NASDAQ or Russell emini – or just about any US equity index future.

What about timeframe and trade frequency?

The models are intended just for intraday trading so there is no overnight risk. On average they trade once per day, though for the more aggressive models this can be higher. If the signal is not stopped out, the trades will often run for much of the rest of the trading session and exit on the close.

“If one is looking to sell the output from a trading model, absolute security is essential.”

How fast is the trading cycle? Is there much latency?

The complete cycle from the initial signal being generated to clients receiving trade confirmations from their brokers takes a maximum of around three seconds. I monitor that by discussing this regularly with clients to check on performance. I think a significant portion of the trade cycle is probably accounted for by internal application latency on the development platform.

By today’s latency standards three seconds seems quite slow?

I think if the models were generating thousands of orders per day, each of which was trying to capture one tick, then this might be an issue. However, the important point is that the models typically only trade once a day, so any latency has a minimal effect. Furthermore, the models usually generate signals before a move develops, so it is not as if they were trying to place orders in the middle of a scramble by the rest of the market to climb aboard.

Are your clients mostly retail traders?

No – absolutely not. There are a very few small retail clients who receive trade signals online. They will typically be trading between one and ten lots per trading signal and can choose from two trading models. However, the bulk of my clients are professional traders – either hedge funds or substantial prop traders who trade full time for a living. All the professional clients receive the trade signals via StrategyRunner (we insist that they use it). They may be trading a hundred lots at a time, and can choose from among five trading models. In terms of distribution we have clients in Asia, Europe and the US.

Do you have many commodity trading advisers as clients?

No, but interestingly we do have hedge fund clients. In fact one of our newest clients is a US hedge fund that originally approached us and made an offer to purchase the trading logic for one of the models. We were not prepared to do this but the hedge fund was happy to lease the trading signals anyway. At present they are only trading about sixty lots, but they are about to increase this to somewhere between three and five hundred contracts.

Given the number of professional clients you have trading in significant size, do you not have a problem with performance deterioration?

No. Even allowing for the scale of their operations, the total volume of contracts traded is relatively small given the extensive liquidity of the S&P e-mini. There certainly hasn’t been any performance deterioration.

 

company and organizational news

Company & Organizational News

InduSoft Launches Certified Integrator Program Certification entitles integrators to discount pricing on runtime licenses, special pricing on InduSoft products, and free technical training–all without annual support fees. Intergraph SmartPlant and PAS Integrity/DOC4000 to be integrated Intergraph will integrate SmartPlant Enterprise with the PAS Integrity/DOC4000 to provide plant owners with a consolidated view of their control infrastructure. Autodesk reports 1Q revenue of $599 Million Autodesk reported revenue of $599 million for the first quarter of fiscal 2009, an increase of 18 percent over the first quarter of fiscal 2008. Innova Robotics & Automation changes name to CoroWare Innova acquired CoroWare Technologies in 2006 and prefers its logo and brand recognition. Green Hills Software supports Xilinx Virtex-5 FXT FPGAs Software includes INTEGRITY RTOS, C/C++ compilers, MULTI integrated development environment (IDE), virtual prototyping platform, and DoubleCheck static analyzer.

 

Electrical Design Software

Use of electrical CAD software is driving productivity gains for panel builders, system integrators and end users by adding layers of intelligence to two-dimensional drawings.

Renee Robbins, Control Engineering — Control Engineering, 6/1/2008

Troy Schmidtke is passionate about software and the role it can play in a U.S. manufacturer’s competitiveness. His passion, however, is not focused on the massive business systems that take armies of consultants years to get running, but rather on a more precise, practical, and focused class of software that controls engineers may not be making the most of: electrical computer aided design (eCAD) software, part of the computer-aided engineering (CAE) software market.

“In what industry is the U.S. the undisputed world leader?” Schmidtke asks, rhetorically. “It’s software. So why aren’t we leading that trend here? Manufacturing alone is not enough anymore.” The true value add that U.S. manufacturers can offer comes from the capabilities and flexibilities they provide through smart use of software.

Schmidtke is CEO of Design Ready Controls (DRC) Inc., a Minneapolis, MN, original design manufacturer (ODM). ODMs help machine builders design and manufacture control panels, and they often operate as the control design and manufacturing extensions of their OEM customers. DRC started as a contract manufacturer, but, says Schmidtke, “we’re more and more software focused.”

Like many engineers designing the schematics for control cabinets, Schmidtke started out focused on physical controllers, wiring, and conduit. He and his engineers used a simple installation of AutoDesk’s AutoCAD to create, store and share circuit drawings electronically. Many engineers still use CAD software this way today, because it’s simple and familiar.

Users of electrical CAD software, however, can realize large productivity improvements over the use of basic CAD. Unlike standard CAD software, eCAD contains specialized functions, templates, and symbols that profoundly increase design efficiency, and eliminate the errors caused by repetitive manual tasks.

CAD vs. eCADTo highlight the differences in eCAD software and traditional CAD, Autodesk conducted a productivity study that pitted AutoCAD (the company’s principal CAD software package) head-to-head against AutoCAD Electrical (an eCAD software package it acquired from VIA).

The study measured the time it took to perform 10 common controls tasks and found that eCAD software users performed consistently quicker. For example: creation of new designs was 84% faster; editing of existing designs was 77% faster. Creating panel layouts from an existing control schematic happened 61% faster. To complete all 10 tasks, users of AutoCAD software required 36 minutes, 52 seconds, while users of AutoCAD Electrical software required only 7 minutes, 37 seconds—an overall productivity gain of 80%. In addition, 30% fewer commands were required to complete the same tasks, thereby greatly reducing the risk of errors.

eCAD programs allow users to automatically generate electrical schematics. This saves time and also reduces errors because tasks like wire numbering and cross referencing are handled automatically. The software also lets user edit PLC data, export tags for a wire list, and create bills of materials (BOMs).

Since becoming aware of the advantages of eCAD, Schmidtke has worked with EPLAN Electric P8 and promise-e software packages. (Bentley Systems, Inc. in Exton, PA acquired Brookfield, WI-based ECT International, developer of promise-e, in January 2008. EPLAN Software & Services, a wholly owned subsidiary of enclosure manufacturer Rittal, is based in Monheim, Germany.)

“We like EPLAN,” says Schmidtke. “The Europeans are considerably farther ahead when it comes to eCAD, and they’re moving quickly. We like how EPLAN has been architected to a database. It’s very conducive to what we do.” EPLAN Electric P8, introduced in 2006, combined the technologies of EPLAN 21, an object-oriented system, and EPLAN 5, a graphics-oriented CAE tool, under one system.

In response to the capabilities of eCAD, DRC has introduced Automated Panel Expert (APE) software, a trademarked and copyrighted expert-system based tool that drives eCAD software. “APE is a configurator that runs in front of eCAD, taking advantage of eCAD’s abilities to set up queries and quickly generate a set of intelligent documents,” says Schmidtke.

While eCAD programs make computer-aided drawing software specific to electrical needs, the APE configurator automates design tasks based on specific industries, such as HVAC, water/wastewater, air filtration or energy.

Using EPLAN’s automated programming interface, APE is able to process an order and feed EPLAN Electric P8 a complete set of drafting instructions for each panel ordered. With this instruction set, and utilizing its own unique placeholder object and macro variant technology, EPLAN Electric P8 is able to pick, place, and size the necessary devices, component parts and wires into a set of as-built schematics and layouts. The software is subsequently used to diagnose the drawings for accuracy and generate manufacturing reports including as-built PDF schematics and machine tool instructions.

In previous generations of APE, says Schmidtke, many months of programming were required to create the engineering documentation required to build and wire the panels. Using eCAD software, DRC does not have to program individual aspects of a circuit, such as wire gauge and protection sizing. This can save significant time, and reduce errors.

Error-reduction evolution“Error reduction features such as automatic wire connection, automatic wire numbering, and automatic cross referencing were available in the first versions [of EPLAN] created in 1984 to run on early x86 DOS computers,” says Oslem Falkiewicz, EPLAN marketing manager. Users were also able to manage parts and automatically generate BOMs, terminal diagrams, and cable diagrams for more efficient and accurate equipment installation.

eCAD’s early focus on documents and drawings has given way to a greater focus on database functionality and interoperability. Key features of eCAD software include the ability import and export drawings in a variety of file formats, the ability to track changes, and libraries of symbols and device data that can automatically populate a drawing. AutoCAD Electrical, for example, ships with more than 2,000 schematic symbols.

Bentley Systems Inc.’s promise-e works with SQL and Oracle database file formats to facilitate enterprise data management. It also includes built-in wizards to create symbols, macros, and database content. eCAD users “are computer literate but not necessarily computer geeks,” says Arthur Sawall, developer of promise-e and now vice president with Bentley Systems. “Therefore, eCAD vendors need to take the graphical object from the component manufacturers and link it to a record in the database, such as connection points, and give it a device tag.”

Sawall says promise-e has symbol libraries and components from several major automation providers, including Rockwell Automation, Siemens, Eaton, Modicon, GE, Panduit, Weidmüller, and others.

EPLAN also has tested and certified device data created in collaboration with component manufacturers. Available via Data Portal, a Web-based repository, are macros of sub-circuits, assembly drawings, function templates for an intelligent device selection, international designations, preview images, and manuals.

Using such symbol libraries and pre-built macros “not only makes searching individual manufacturer catalogues unnecessary, it also eliminates the need to type in part numbers or create one’s own macros,” says Falkiewicz. “The time allocated to these fishing expeditions for the right components is instead turned into productive work time.”

The ability to track changes to a design made by a customer or other collaborative partner is another key benefit of eCAD software. To handle such transfers and tracking, AutoCAD Electrical compares previously exported DWG files with the original so that an exception report can be generated.

promise-e contains all data in a DWG file, as well as in an SQL or Oracle file. “Because we have a database, we have a data editor. This means I can open the editor, which looks like a spreadsheet, and I can update the data and have it automatically update the schematics,” says Sawall.

EPLAN’s redlining function allows all documentation to be converted to PDF format and subsequently made available for review and modification.

Companies that export designs for global assembly face an array of regulations, and eCAD software can help by standardizing documentation and automatically translating languages.

General Motors, for example, addressed this concern in 2006 when it announced plans to unify its various CAE tools throughout Europe, Asia, and the U.S. under one global standard, EPLAN Electric P8. For GM, this provided the opportunity to standardize its engineering across geographies. GM plants in various countries now can work on the same project in their respective languages, with automatic conversion to the preferred symbol representation of their country.

At Honeywell Process Solutions, engineer, procure, and construct (EPC) contractors like Fluor will dictate the formats that they want for electrical documentation, says Matt Willmott, a 16-year veteran of the project engineering services arm of Honeywell. A typical milestone for these system integration projects is delivery of design documentation. Willmott says that such requirements are leading Honeywell to move away from general CAD software and toward the use of a data-driven tool for electrical design documentation, E3.schematic from CIM-Team/Zuken.

Honeywell has developed a customized software package called Drawing Generator on top of the E3.series tools to execute the design and implementation of safety and control systems globally. A library of Honeywell objects are being developed to further increase productivity through design reuse and standardization, says Willmott.

Intelligent three-dimensional drawings are the next frontier of design software, and a number of eCAD vendors have expanded into 3D plant design tools so engineers can work in the same environment to create things like piping and instrumentation device (P&ID) diagrams. The latest E3.Series software version, for example, lets users output panel data into STEP AP203/214 format. This enables transfer of design data to create three-dimensional models in 3D mechanical CAD environments.

Bentley Systems commissioned a 2008 study that compared use of 3D design tools to 2D tools. The study found that productivity with 3D tools for overall plant design increased by at least 15% for more than 70% of study participants. Personal productivity increased at least 50% for more than half of participants.

Because electrical schematics are, by nature, two-dimensional drawings, 3D technology may not be important to eCAD users. But the integration of electrical controls design data with other digital manufacturing software is likely to continue, as reuse of data continues to drive productivity improvement.

 

Emerson software helps Minnesota power plant improve operations

PITTSBURGH (May 29, 2008) — At Minnkota’s Milton R. Young station, use of Emerson Process Management’s SmartProcess Unit Response Optimization (URO) technology is translating into dramatic operational gains– including a 70 percent improvement in ramp rate. These performance improvements are helping the station generate megawatts more efficiently as part of the Midwest ISO in which it now participates.

The Young station is owned and operated by Minnkota Power Cooperative, which provides electricity to 11 associated distribution cooperatives in eastern North Dakota and northwestern Minnesota. Young Unit 1, located near Center, N.D., is the primary source of electric energy for approximately 110,000 customers. This lignite-fired, 250-MW unit, which began operation in 1970, is equipped with a Babcock & Wilcox (B&W) cyclone boiler and General Electric steam turbine generator.

For years, Young Unit 1 operated as a base-load unit in which megawatt production levels remained relatively constant. This changed when Minnkota recently started participating in the Midwest ISO, an operating environment in which revenue is dependent on a station’s ability to quickly and efficiently respond to constantly changing load demand. This environment was particularly challenging for Young Unit 1, which was now also required to offset megawatts whenever recently added wind farms are unable to meet demand.

Previously, Unit 1’s response to load setpoint changes often resulted in over/undershoot and lagging load response, both of which contributed to lost revenue. To help resolve this issue, in the fall of 2007 Minnkota implemented Emerson’s SmartProcess URO technology to more efficiently meet fluctuating demand. The SmartProcess URO solution, which uses actual plant operating data to create a model of process response and unit characteristics, has been running continuously ever since.

The results have been dramatic – a 70 percent improvement in ramp rate, from 2 MW/min. to 7 MW/min.; a 2-megawatt reduction in over/undershoot; and a 4 PSI average decrease in throttle pressure, contributing to overall machinery health. As an additional benefit, the SmartProcess solution has also been instrumental in helping Young Unit 1 pass its routine turbine steam inlet valve tests.

“Because the Young Station is now participating in the Midwest ISO, we need to ramp to setpoint more quickly, with reduced variability in megawatts and pressure,” explained Dana Stumpf, technical supervisor, Minnkota Power Cooperative, who adds that the SmartProcess URO solution will be installed this year at Young Unit 2. “Emerson’s SmartProcess Unit Response Optimization technology has significantly improved unit response, which is critical to our capability to operate more profitably.”

The SmartProcess URO is part of Emerson’s comprehensive suite of optimization technologies seamlessly embedded within the Ovation expert control system. Incorporating fuzzy logic, advanced analytics and model predictive control, these technologies offer adaptive improvement solutions which help utilities achieve optimized equipment performance for emissions compliance, temperature control, efficiency and overall continuous operational improvement.

Using nonlinear dynamic feedforward and model prediction, the SmartProcess URO builds upon Ovation’s existing unit coordinated control capability to further enhance the boiler and turbine response for tighter overall control and more efficient operation. Use of SmartProcess URO technology translates into additional revenue opportunities for power generators by enabling units to more accurately hit targeted setpoints with minimal megawatt overshoot, thereby contributing to reduced fuel costs; helping units quickly ramp to targeted setpoints and allowing them to generate revenue as quickly as possible; and enabling units to follow load demand, making it possible for them to compete in the ancillary power services market.

“Emerson understands that the power generation industry’s operational and financial climate has never been more demanding,” said Bob Yeager, president of the Power & Water Solutions division of Emerson. “Because of its ability to dynamically optimize plant operations during constantly changing demand, our SmartProcess optimization technologies can help power producers improve plant economics and achieve a timely return on their optimization investment.”

About Emerson Process Management
Emerson Process Management, an Emerson business, is a leader in helping businesses automate their production, processing and distribution in the power, water and wastewater treatment, metals and mining, chemical, oil and gas, refining, pulp and paper, food and beverage, pharmaceutical, and other industries.

Emerson’s Power & Water Solutions division is a global supplier of advanced distributed process control and information systems. The Pittsburgh-based company is a recognized leader in developing plant-wide process control solutions for the power generation, water treatment and wastewater treatment industries. Power & Water Solutions plays a key role in the Emerson mission of combining superior products and technology with industry-specific engineering, consulting, project management and maintenance services. Emerson brands include: PlantWeb; Ovation; Scenario, SmartProcess; Fisher; Micro Motion; Rosemount; Mobrey; Daniel, Bristol, DeltaV; and AMS Suite.

About Emerson
Emerson (NYSE: EMR), based in St. Louis, is a global leader in bringing technology and engineering together to provide innovative solutions to customers through its network power, process management, industrial automation, climate technologies, and appliance and tools businesses.

 

Applicational news

Application News

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