http://interactivebrokers.com/
they have matlab, java, etc. connectors
You can also work with some of the larger banks and boutique firms, either in a DMA setting or routing through the exchange. Generally you need 100-250 to get that solution going, and you need to use FIX or the exchange proprietary protocols (e.g ITCH/OUCH for nasdaq)
I would like to create a game that teaches beginner investors how to invest with real money by looking at a company's strategy and basic financial data. To do this, I would like to use the otc market and about 50 companies that I will provide analysis on. I would like the transaction cost for the trades to be low, as low as possible to reduce barriers to entry in playing the game. So maybe with 5 dollars you could buy stock and start playing. If it would make sense and be more cost effective, I would do non-realtime trades, and maybe just run a batch of orders once per night.
Do you think DMA is my best move? Is there another option that might be better? Thank you.
If your goal is to "teach beginning investors how to invest", then why not set up a paper trading system? Basically, you can build a simulation engine that lets people try to trade with paper money.
If your goal is to "teach beginning investors how to invest with real money", then you need to go through all kinds of legal hoops:
- Lets say you are just giving investment advice (there are a bunch of companies that just generate trading signals). You need to pass a few Series tests in order to be legally authorized to give advise e.g. Series 7: http://www.finra.org/Industry/Compliance/Registration/Qualif...
- Lets say you just want to be a broker, allowing others to trade through your platform. This is not a bad idea, so long as you can ensure that investors seed money before they start and that they dont short. There are a few snafu's regarding SIPC compliance (your operation will be considered an investment activity, and as such investors may expect protection).
At the end of the day, though, you can find discount brokerages with low costs to trade. For example, Zecco Trading has $5 trades.
So that gets back to the question: What are you teaching investors? If you are teaching general signals that can be implemented in an all-active strategy (i.e. if your signal is strong enough, you can afford a penny slippage costs), then DMA does not matter. You can do it with matlab hooked against IB or some other platform. If you are teaching specific execution mechanics (market making, rebate capture) then it makes no sense to run the system from a proprietary infrastructure [the investors have to be able to use it] unless you make it accessible for them to use after the learning period is over. In that case, see the discussion about brokerage.
The main regulatory body is the Financial Industry Regulatory Authority (FINRA).
Sucks that HN has no private messaging feature.
You can also
1) charge for the advise. Something relatively small but accessible to most people. THAT would be a game changer :)
2) pitch the idea to fidelity or some other consumer facing brokerage. If you have good material, brokerage companies love it.
3) fake the trades. For example, Lehman Europe [LBIE] used to allow for infinite leverage by simulating each position (withdrawing money from the account when clients bought, and replenishing when they sold again). So you could do the following:
- hold the positions that you advocate - when people want to "buy" the signal (buy when you say buy, sell when you say sell), then basically sell the exposure to their account - when people want to "sell" the signal (opposing you), then just take a naked position. Ostensibly, if your signals are good, then you should make money :)
I would highly recommend learning about finance via a trading job or internship. There are a lot of subtleties involved. Not that you couldn't learn by reading a bunch of books, but finance is highly regulated and its important to understand all the ins and outs :)
What you are mentioning above, seems too complex. If this concept were to grow more, I would focus on elements from Discounted Cash Flow.