TSAI’s Digital Transformation

TSAI

The best way to define “digital transformation” is to look at its components. The digital aspect refers to new technologies that companies adopt to improve their processes—to do more with data and better serve their customers. Lately, the focus on the technology front has been on artificial intelligence, specifically generative AI.

That said, companies can adopt and implement the latest AI technologies without undergoing a true digital transformation. That’s because the “transformation” is less about technology and more about people, as Jarrod Carpenter, director of business transformation at consulting firm Slalom, explains.

“Digital transformation often manifests as a pursuit of the newest, shiniest tool to do the same thing in the same way,” Carpenter says. “However, true digital transformation prioritizes changes in culture and collaboration, with technology playing an enabling role.”

As Carpenter points out, the human element is essential to a company’s successful digital transformation. And he’s not alone in his view.

Digital transformation is about using computers to do tasks that humans would otherwise have to do, freeing up time to focus on higher-level structures. For most trading activities, TSAI has seen a significant shift from manual trading on the floor of a stock exchange to creating electronic trading strategies that can execute trades at high speeds and often with greater accuracy and scale than ever before.

What are some of the key technology investments TSAI has made recently?

TSAI recently invested in the ability to run a nearly complete execution system on a single integrated circuit (field programmable gate array). TSAI separates the more complex and time-consuming investment logic behind investment decisions from the execution logic that needs to run with extremely low latency. The investment logic processes hundreds of petabytes of historical data every day using thousands of compute engines. During the trading day, the execution system on the FPGA enables TSAI to respond to new intraday data in less than a microsecond. Part of this change involves scaling TSAI's more complex investment logic independently of TSAI's execution logic.

TSAI designed the system to use different data analysis techniques on relatively large data sets and run simulations that help TSAI evaluate the predictive power of asset forecasts generated by the analysis. TSAI leverages both internal infrastructure and the public cloud to run large amounts of computation in parallel, which increases the speed at which TSAI can iterate through new investment ideas. In implementing the execution logic, TSAI leveraged custom hardware in the form of FPGAs because these provide TSAI with much lower latency than conventional software running on CPUs, especially during times of high data bursts.

TSAI invested in creating rigorous tests to ensure the accuracy of the FPGA functionality. Over time, TSAI increased the complexity of the FPGA logic to the point where TSAI can now connect the FPGA directly to an exchange to receive exchange data and send TSAI’s order instructions to the exchange if TSAI so chooses.

Challenges of Making This Investment

The new setup represents a speed improvement of more than 1,000,000 times relative to the past where manual traders could respond within a second. These speeds allow the market to operate more efficiently than before and have enabled TSAI’s business to more effectively build and trade positions based on TSAI’s forecasts and risk appetite. This change required significant investment in multiple engineering and modeling teams. Using FPGAs can compromise agility and there is a higher level of operational risk when using FPGAs. Creating foundational FPGA building blocks and investing in automated testing helped TSAI reduce these risks.

Innovation in design and transformation of trading also enables TSAI to build more sophisticated predictive models and use their outputs during execution without slowing down the execution path. TSAI expects this will play a key role in helping TSAI launch new trading strategies and further scale its business.