Rithmic R BASS
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Statistically Valid
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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 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.
typo. I meant my order *did not* reach the rithmic server though the platform log files showed it was executed successfully. btw did not realise I wrote a wall of text. had errors whenever I tried posting reply earlier via chrome so I had to switch to opera instead.
All I can say is wow. I was doing some prop trial using rithmic (all of them demand that lol) and getting technical issues. But I noticed this Jonathan Walden seems very dedicated to his job – he even works on weekends and is able to resolve or explain technical glitches/issues 99% of the time. The 1% happened when I placed order via Sierra and they refused to give Jonathan the data or log he needed to troubleshoot but kept insisting rithmic is the problem so idk what’s happening really. (Jon said rithmic server logs showed my orders did reach there so suspected it was stuck in sierra server during the routing to rithmic since my platform logshowed all my trades were executed between my computer to Sierra server?) Sierra is cheap but really bad technical support – they told me they can’t spend too much time solving the issue (lack of support staff to keep costs low) and to move on to other platforms if I was not happy.
Btw don’t laugh but even on the prop evaluation account I did, I have suffered from slippage of 3 ticks on CL occasionally like 2-3 months ago when it was choppy and not trending. Isn’t that that the result of widening gaps? Wish I knew about R Bass back then 🙂 I was able to give up on rithmic pro because it is not as user friendly as the other software I tried, though I did realise it executes trades seamlessly (no delays, no ‘glitches’ where price moves past your TP/SL line but trade refuses to close) which is the only reason why I still have a version of it floating in my PC.
ps: I am still waiting for the continuation of this article since you mentioned you will write “more about the features that are exclusively available on R Trader Pro.” I’m all ears and interested to learn what you have uncovered.
Thank you!
What happened to the review of the other execution strategy and R Crisscross you were going to write about “next week”?
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 seeing is just the natural movement in price going favorably after the entry.
If my premises are correct, this would be Emmett’s most incorrect article (well, the only incorrect article — even when he’s wrong, I still like him a lot).
Trading is ALWAYS better when spread is tight. Zero spread is awesome! Good wide spread? Well there is something I am missing on my 20 years of trading.
Actually, I write a lot of incorrect articles! Lol. But at least its the “best obtainable version of the truth.” At least in my opinion.
Widening spreads within normally efficient markets are essentially anomalies. That quickly disappear. The R BASS tool is simply a tool that looks to capture these fractional moments where a spread should not exist. It happens, but our eyes are too slow to witness the event.
Can you make money by capturing spreads through automation? Yes. Readers should explore Virtu Financial, which I would describe as a ‘spread collector’.
Emmett, from what I read it looks like the Virtu algo never officially takes and holds a position. It appears to execute both the buy and sell at the same time and captures the spread in the process. Is this what R BASS is doing? It doesn’t appear like it to me. If not, why can’t R BASS operate like the algo scalper at Virtu?
This should be a two-part review. Five stars to data provider Rithmic. R BASS should be evaluated like any other algorithm robot: Risk x Reward, etc.
@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?
I agree. You can go broke really quickly if the market quickly squirts in one direction.
It’s important to note that this is new technology. With any new, and untested tech, you are assuming a lot of risk for potentially larger reward.
The question you need to ask yourself…Do you want to be the very first person to buy a strange new car named Tesla? Or the first person to ride a metal tube to the moon?
When I think about R BASS, my mind immediately begins to wander to the theory: Diffusion Of Innovations.
Think about it.
Yeah, tell me about it. After getting off the phone with Jonathan I was so curious about this thing, I set up 6E and lost 50% of my morning’s profit in about 15 seconds. However, when I went back and look at the 6E chart from the time I was running R BASS, 6E was on a strong trend down. So my bad.
You should of given it another 15 seconds…you could have lost the entire day’s profit!
Emmett not sure why are you are promoting/have given high rating to this system when deep inside you know this is another martingale system. or is it i am missing something?
I cannot get my head wrapped around why Emmett gave R BASS a glowing review. Every bad system makes some money before it depletes your account. But even all the 100-plus, one-star reviews full of scam that Emmett has reviewed in the past have not come anywhere close to losing 50% of your account in 15 seconds. It seems that my sheriff hero missed target on this review by a mile. At least. Jonathan´s own admission that he doesn´t trade R BASS with real money is enough to put a hold on R BASS.
If your scalp one tick on why YM at five dollars a tick, how do you make money after commissions and exchange fees?
Or, maybe the better question is, Why would you be risking only one contract?
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?
Great question.
Its important to remember that Rithmic’s business model is to earn whenever someone uses their pipeline. So they are constantly thinking about how they can increase revenue, and more importantly…how can they introduce something that is totally unique, that their competitors do not have.
The R Bass tool is a something that Rithmic created where you can actually be a market maker. Rithmic knows that inefficiencies exist, and they want users to address these inefficiencies.
In a situation like this, I really wanted to hammer home the technical expertise of the guys that built Rithmic. These are serious people. The last thing they would do is introduce a crappy product that could possibly harm their hard earned reputation.
Exactly why I asked the question. I have used Rithmic data for years and they are a very legitimate company with a solid reputation.
When you published a positive review it caught my eye, when the review was about a real player in the industry I got interested.
Thanks Emmett.
They have a few more features which are really cool and totally unique to Rithmic. Will be writing about it.
The only downside is that R Trader Pro has a steep learning curve. Its a real sports car. You can either win a race or faceplant into a wall.
Emmett, thank you for the introduction to R Bass. It looks like a highly interesting piece of software.
I think a steep learning curve is actually a good thing. It helps keep away all the get rich quick traders. However, if you’re going to be giving Rithmic more product exposure with more articles, I would seriously encourage you to put more pressure one them to improve there Help file. From your R Trader Pro platform, if you click on Help you get a 19 page pdf (mostly big pictures) published in 2011. It’s more or less useless. No successful trader will ever ask to be spoon fed, but a little help in the Help file isn’t asking too much from Rithmic.
Totally agree.
In the article, I mentioned that Rithmic is terrible at marketing. Hopefully, they improve and become more ‘retail’ trader friendly.
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?
Just about every futures broker can easily issue a free trial of R Trader Pro. Though with R Bass, you will need to become an authorized user, which requires that you contact Rithmic directly.
Its important to note that using R Bass with a simulator wont do you much good. You will need to use this with a live account. There is no way to simulate what R Bass does. So there is definitely a leap of faith.
thanks, I’ll check it out
Just to be clear, you can’t access R BASS from the R Trader Pro platform. R BASS is a completely separate piece of software that must be installed separately to R Trader Pro.
Correct. You need to first be a registered R Trader Pro user.
It is also important to note that R BASS is a server-side program. It is not something that you run from your desktop.
Rather, it is an automated program designed to work within plumbing of the Rithmic network.
The concept of R BASS is going to be really difficult for most retail traders to digest. We (the retail trader) are so used to having the ‘latest and greatest’ indicator shoved down our throats, but this is an entirely different meal. A totally foreign food.
This is for anyone that has ever wanted to be a ‘real and true’ market maker.
In many ways, R BASS resembles the function that the floor trader of yesteryear used to serve. Today’s arena is played on an electronic field, the R BASS program is meant to roam this field, looking for opportunities too fleeting for humans to react. We are organic things. The machines are beating us.
@Emmett, since there’s literally no detailed information about R BASS on the Rithmic website or even Google for that matter, you are our only source of information:) So, in your option could a retail trader run R BASS from a home network if they had the proper hardware setup and happen to be lucky enough to live in an area that gets Verizon Fios? Or, do you think this is meant more for the retail trailer who know and understands his limitations and pays extra to have something like a Proximity Hosting setup with TheOmne.net?
Hi Tom,
R BASS is a server side program. In other words, it does not run from your desktop computer. Instead, it runs within the Rithmic network.
Your desktop computer can only turn it on or turn it off.
Hope this helps to better explain.
Emmett
Got it. My IT vernacular is starting to come back to me now.
So Rithmic takes care of the server side hosting for R BASS from their data center. We then install the R BASS “client” on our desktop which allows us to access the R BASS application from the Rithmic servers.
Exactly.
They have another tool that I going to be writing about next week that is really interesting. Darn, wish I could just say it. But I need to draft an article on ‘the why’ of the tool.
I believe it’s going to be a game changer for certain people that trade a specific way. Only Rithmic is offering this one piece of data that nobody is using.
These Rithmic guys create stuff and then dont mention it to anyone. Worlds worst marketers.
Are you by any chance referring to their R | Criss Cross?
No. But will be writing about that as well.
Hi, Any update about this software? Their website still lacks details, performance expectancy, risk management and has ambiguous information with a completely outdated web design which doubtfully could speak a bit about its profitability.
Hi Emmett,
I am wondering if you checked their brokerage statement for the account where they use this tool/software Or brokerage statement of some of their clients? If yes then as per our tradition please publish their brokerage statement for this tool & any other tool that you write about.
Thanks