Interview with Gerrit van Wingerden, Caspian CTO and Co-Founder
Gerrit is the CTO of Caspian and has been a Managing Director at TORA for the past 12 years. At TORA, he built a software platform which is at the heart of equity trading for hedge funds around the world. In our conversation, we discuss the genesis bringing crypto into the TORA universe, Gerrit’s passion project of building crypto-trading bots in the early days of the industry, and potential trading strategies in the current crypto landscape.
How would you describe Caspian to someone who doesn’t know much about institutional trading?
Caspian is a suite of tools that anyone running a proper crypto trading business will require in order to survive.
Hold on. Some institutions have been trading crypto for a little while now without Caspian, how have they survived?
Yes, you’re right. However, from my conversations with clients, it is clear that a lot of them have been going through a lot of pain. The industry is relatively young and is constantly evolving, there is still a lack of tools out there. The vast majority of clients are managing their portfolios on Excel spreadsheets, trading through python scripts, and using multiple web interfaces. There are a few exceptions of course, but for the majority of funds, they are experiencing a lot of growing pains.
We’ve spoken to hundreds of funds, and almost every single one has said Caspian is a system they would benefit from using.
Of all the functions you’ve worked on, what do you find clients care about most?
What’s surprised me the most is how much excitement clients have for the PMS (Portfolio Management System). They’re almost all telling me that they have difficulty tracking their real time and historical P&L (profits & loss). Most funds use Excel spreadsheets, which they’ve written in-house and often lack necessary functionality to efficiently track their positions.
A few have gone so far as to beg (I’m not kidding) for early access to the PMS because that’s their most critical pain-point.
Clearly institutions care a lot about the product. As we talk to non-institutional traders, why do you think they should care about Caspian?
A lot of institutional money won’t come into the space until the tools are more sophisticated. When the funds do come in, the capital inflows will be enormous. This could have a substantial positive impact on prices and volumes which should benefit all crypto traders, institutional and non-institutional alike.
You had a successful career building out institutional grade trading software for equity hedge funds at Tora. What made you excited about expanding the offering to crypto by building Caspian?
Crypto has long been exciting to me. Back in the early days of crypto, I wrote crypto-to-crypto trading bots for fun. I always wanted to add crypto as an asset class, but it didn’t really make sense until last year when we started to see many funds entering the space and inquiring about crypto.
When you were building bots early on, what were the biggest pain points?
Most problems revolved around the exchange APIs. Each exchange has their own proprietary API which you need to write to if you want to programmatically place orders or query your positions. Many of them don’t work as promised and sometimes just don’t work at all. Even the ones that do work often have severe restrictions on how frequently you can do things like place orders. So you end up spending a lot of time coming up with tricks and optimizations to deal with these limitations on an exchange-by-exchange basis. It’s not rocket science, but it is very tedious and can tie up significant development resources.
I come from a traditional equity background where market participants use a standard protocol called FIX, and everybody’s FIX implementation is robust and works. In that world it would be unimaginable for an exchange interface to behave in the way that many crypto exchanges do.
Given how difficult it is to interact with exchanges, what made you think Caspian would work?
Well, I saw how difficult it was to connect to a lot of exchanges and also how important it was for institutions to be able to trade across multiple exchanges and realized there was a big opportunity to build a product like Caspian — an institutional grade system that, among other things, connects to multiple exchanges.
How have things changed since 2013 when you were writing bots yourself? Have the APIs evolved and are they easier to work with?
Amazingly, things haven’t changed much. Connecting to exchanges is still difficult and time-consuming.
Do any exchanges have strong APIs? Any shout-outs?
I think BitMEX has an awesome API. It’s well thought-through. It doesn’t use the FIX protocol, but a lot of the language and terminology is similar. Also, Gemini have done an excellent job with implementing FIX connectivity.
Tell me a little bit about the Caspian engineering team. How many engineers do you have? Where are they based? How do you organize your team?
We have 40–50 engineers working on the project, primarily based in Romania, where we’ve had offices since 1999.
A lot of the work is on exchange connectivity, as I’ve already discussed with you. This is important for both our OEMS (order execution management system) and PMS. We also have engineers that are focusing on things such as key storage and adapting our algos for crypto.
Can you explain more about key management? This is different from the keys everyday crypto traders have, right?
Correct. If you’re not writing a bot to interact with an exchange, you don’t need a key. Most retail traders would just log in via a web interface. If a trader wants to write a trading bot, the exchange has to have some way of recognizing that the bot is authorized to trade on the trader’s behalf. Exchanges issue keys which bots use to authorize requests. These are the keys we are talking about.
It’s very important that those keys are kept safe. Similarly to a bot, Caspian places trades on the users behalf. So Caspian needs the users key to authenticate each trade request. Caspian has built a solution that allows users to host a service that authenticates transactions on behalf of Caspian This means Caspian doesn’t need to store our user’s keys, and if our system was ever compromised, the keys would still be safe, as we don’t have them.
How about “throttling,” what does that mean?
Most exchanges limit how frequently users can make an API call. This process is called throttling. There are some tricks you can implement such a taking advantage of batching supported by some exchanges and cycling through a pool of source IP addresses to reduce the effects of throttling. We have engineers actively working on implementing these at the moment.
How do your engineers feel about working on Caspian?
A lot of our engineers had already built their own bots and became interested in crypto years ago, so for them this is a very exciting project. One nice thing about the crypto space is that it’s much easier to get good developers to come work for you. There’s a newness and appeal about the space, especially around some of the projects on our roadmap, such as integrating with the decentralized exchanges — developers really want to work on these projects!
What surprises have you had amidst the move from traditional markets to crypto?
Things have taken much longer than I expected. Having years of experience interfacing with exchanges and brokers, I thought that things would move much more quickly. We’ve made excellent progress, but we wish we were moving faster.
I can honestly say that 90% of the slowdowns have had to do with uncertainty around exchange APIs. They’re very difficult to test. For example, when it comes to extracting historical data from exchanges you only encounter some types of issues when dealing with lots of data. Only when we started working with beta clients did we realize that it might take 30 minutes to query a certain exchange — or that exchanges will block you all-together if you query them too often. We’ve had instances where we think an exchange is completely solid and then suddenly, when our clients trade in large volumes, we run into issues.
What’s your vision for the future of Caspian?
A few things:
(1) I’d like Caspian to be connected to every single exchange that our clients want to be connected with, which will essentially mean every exchange on the planet.
(2) I’m very excited about the prospects for decentralized exchanges. There are currently issues around lack of liquidity, scalability of ethereum, and KYC processes, but the community is working hard to address these. We are going to be in a position to drive a lot of liquidity to decentralized exchanges and we have a lot of ideas as to how we will do this.
(3) Building out a robust risk management platform. There’s a lot we are going to be porting over from our non-crypto product and building into the risk management product.
(4) A mobile version of the system.
(5) An app store within Caspian. Since we’ve announced the product we’ve spoken to many teams building applications that would complement Caspian nicely. One example would be integrating with crypto lending systems. Research report portals and trading signal providers are also potential integrations.
What advice would you give to young developers interested in building crypto trading products?
If the purpose of your trading is to make money, I would focus a lot of time on looking for new ideas and testing them. You need to be careful because the space changes constantly, and strategies that work today could very well not work tomorrow. So you have to use your time wisely; it’s frustrating to find an idea, build a bot to capitalize on it, and see the opportunity close during that window.
Focus on alpha and strategy generation and constantly be on the lookout for new ideas. There are tons of opportunities, just be mindful that ideas which are working now may not work tomorrow.
Without asking you to give away any deep secrets, which strategies do you see as the best ways to make money in the space these days?
One opportunity I see is tracking wallet flows in and out of exchanges. Let’s say you have an ICO that’s collecting a lot of ETH. If you can track the flow of those tokens to exchanges, especially around lock-ups, that could indicate certain activities. For example: when an ICO is selling a ton of ETH on an exchange, that could open opportunities to go long BTC/ETH. I see a lot of opportunity in this area.
The volatility market is nascent but that will mature and there will be lots of opportunities there. Also, lots of the less-liquid regional exchanges provide opportunity, especially when their users are purely retail.
There are still a lot of opportunities.
With all these ideas, do you do any trading yourself?
I don’t trade at all myself right now. I think there would be a perceived conflict of interest if I’m building a system for traders and trading on the side. What I’m most interested in now is building out Caspian, and ultimately figuring out how we can connect to and integrate decentralized exchanges.
Thanks so much for your time, super interesting chat.
Caspian is a joint venture between Tora and Kenetic, who have successful track records in asset management and cryptocurrency investing. Tora is a leading supplier of asset management technology, including an OEMS that averages monthly notional equity volume exceeding US$100 billion and is currently responsible for 17% of Japanese institutional equity trading volume. Kenetic is a blockchain firm committed to expanding the development and adoption of blockchain platforms through investments, advisory services, community and technology.
About Gerrit van Wingerden
Gerrit has served as Managing Director at TORA for the past 12 years. Prior to that Gerrit managed the development of high volume trading applications and analytical tools for various hedge funds and bulge bracket investment banks. Gerrit holds a B.S. in Computer Science from Stanford University.
Caspian is a full-stack cryptoasset management platform tying together the biggest crypto exchanges in a single interface, so as to facilitate investments in crypto instruments for newcomers and veterans alike. The joint venture between Tora and Kenetic brings to the table a wealth of experience in asset management, accumulated over decades of building and operating trading platforms and technologies.