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Asia’s market structure creates demand for increasingly granular trading information – as Kent Rossiter, Head of Asia Pacific Trading Allianz Global Investors and Michael Corcoran, Managing Director ITG discuss, FIX can help.

Asia Pacific faces different liquidity challenges to other regions, particularly given that spreads are often much wider and are therefore an even more significant contributing factor to overall trading costs (See Chart). As the trading environment evolves in the region and the focus on managing costs grows, the requirements for transparency and feedback on trading increases. This is happening in parallel with the evolution of new trading venues in the region, particularly dark pools. Buy-side traders now want a greater level of detail on their dark pool fills to help them understand the behavior of their orders and manage their execution venues proactively to get the best trading result.

Kent Rossiter heads up the Asia Pacific trading desk of Allianz Global Investors, and is constantly looking for ways to improve the efficiency of their process and minimise the costs of trading. From his perspective, while post-trade TCA is now well-established, a particular growth area is the requirement for more detailed data on a shorter timeframe. He explains “We as buy-side traders are now trading an increasing amount of our orders ourselves using the electronic tools available, and when we do so we want more granularity and data fed back to us: which venues are our orders being executed in, at what price, and how aggressively. We want information that helps us adjust strategies on the fly for better trading outcomes, or quickly review the results so we can manage our future performance.”

One result of this is new demand in the region for analysis of maker/taker indicators on orders so that a trader can identify how often they are crossing the spread to find liquidity. Allianz Global Investors has been working with ITG and other brokers in the region to implement support of maker/taker analysis to help the trading desks improve their insight into market conditions and get more transparency into the behavior of their orders in dark venues.

Understanding Maker/Taker
Understanding whether an order is making or taking liquidity is important, particularly in wide-spread environments such as many of the Asian markets. Michael Corcoran, Managing Director of ITG, says “Traders want to know instantly whether they are providing liquidity or taking it, instead of retrospectively needing to compare fills and timestamps manually against what the market was trading at. This can be very useful information to help them adjust the trading strategy in real-time to the market conditions and the liquidity available. It can also help determine what kind of ‘throttle’ they should put on their strategy or their algo to find the right level of aggressiveness for the orders they are working. In addition to that it can also be a very valuable tool for sell-side firms, helping to refine the development and rules of algorithmic strategies and improve strategic ideas that will work for certain clients or order types.”

This is of growing relevance in a multi-venue environment, for example in Asia where over the past few years a lot more broker dark pools have been developed. Many buy-side firms now choose to use a dark aggregator to help improve their efficiency in accessing multiple venues, and here some kind of maker/taker liquidity analysis can be a helpful data point for assessing the type of outcome a trader is getting in those pools. Corcoran explains “Both ITG as a dark aggregator, and our buy-side clients themselves, want to understand whether orders are consistently making or taking liquidity in a specific dark venue so that the impact can be assessed – for example if our client’s orders always take liquidity in a certain venue we would review that to understand why. If we can pass that data directly back to the clients they can then make a decision about whether they want to be removed from that venue or change the distribution of their order flow across different pools. Likewise, if we see orders taking liquidity then see an unexpected change in the stock’s trading profile, this can be a useful warning indicator about the participants in a specific pool.”

FIX Tag 851 – a Potential Solution
A specific FIX Tag, 851, or Last Liquidity Indicator, has been developed by FIX Protocol Ltd (FPL) as an identifier of maker/taker behavior. The US appears to have the most established support of liquidity-indicating tags with exchanges able to pass the data back to brokers and most of those brokers able to pass that on to clients. In Europe, likewise the large exchanges and brokers can support this, although there is less among the mid and smaller brokers.

However, in Asia the tag is sparsely supported, if it all, by the exchanges, alternative lit trading venues and many of the broker dark pools. Firms therefore have to come up with interpretive solutions and workarounds to give their buy-side clients a higher level of detail and transparency on their trading, particularly in dark pool aggregation.

Rossiter would prefer an industry-wide approach to improving transparency and the availability of maker/taker data which includes vendors, brokers, and most importantly the exchanges “Typically the actual FIX tag for this information is supposed to be generated by the exchange or trading venue, and it is passed to the brokers who need to be able to identify and accept that tag and then pass it into the vendor EMS or OMS platform that the client is using. So there are a number of parties within the workflow who are affected and they need to collaborate to bring in changes. An industry-wide adoption of the relevant FIX tag would definitely be a good solution”.

Michael Corcoran of ITG sits down with Jason Lapping, Head of Asia Pacific Trading for Dimensional Fund Advisors (DFA), to discuss the practical impact of electronic trading and dark aggregation on his trading process.

Michael Corcoran, ITG: DFA is one of the largest users of electronic trading techniques in Asia Pacific. Why have you chosen this model and what benefits does it bring?

Jason Lapping, DFA: The primary driver for us using electronic trading is to give us full control over the trading outcomes. DFA’s unique process of generating investment returns is highly focused on the overall returns of an investment decision, and that includes the impact of trading. Portfolio managers generate orders for the trading desk but provide some flexibility over what to purchase on a specific day. This means we can be patient, exploiting the opportunities and liquidity available at any given moment. As a result, around 90% of our global trading volume is electronic. In Asia Pacific, that number is even higher, with over 95% of trading managed by our own traders using DMA and algorithms accessing both lit and dark liquidity simultaneously.

Dark and alternative sources of liquidity also form an important part of our strategy. DFA manages in excess of US $240bn, so we are often interested in trading a large percentage of a day’s volume in a stock. We utilize dark pools to try to achieve this in a way that does not signal to the market. Most of our dark pool fills are small, but cumulatively they amount to a significant extra size traded without signaling the extent of our interest to the market.

We generally trade in dark and lit simultaneously as there is an opportunity cost to placing an order only in the dark. So for us dark liquidity is particularly useful as a complementary strategy.

Firms often describe what they do as trading securities, but in fact what we are doing is trading liquidity. And anything that helps us interact with more liquidity is really important. Therefore in the developed Asia Pacific markets, about 10-15% of our total executions are done in dark pools. We believe this helps reduce implementation costs while getting more done. Both of these elements benefit our investors.

MC: Has the move to full control of the trading process been explained to your investors and do you find it’s a differentiator for DFA?

JL: Trading is very much a value-add in DFA’s overall investment process. So our engagement with clients involves explaining that we have an integrated investment process where portfolio managers work closely with the trading desks, giving them a degree of flexibility. When the market is not going our way, this flexibility allows DFA traders to be patient on a specific stock at a given point in time. When the market is going our way, it allows our traders to be opportunistic. We execute at prices where it makes sense to do so, not because we have been told to get the order done today.

What this ultimately means is that trading can start to add value, rather than being a drag on a portfolio’s returns. The cost of implementation can be significant, and our job as traders is to minimize the gap between the theoretical and actual returns of portfolios. I think that many of our clients find this is a differentiator for DFA, and it is potentially a reason to choose us over another investment manager.

Ian Hoenisch of ITG lays out the perils of current test symbol regimes and describes the work to reduce the inherent risk in testing.


How has testing been done previously (i.e. ZVZZT) and what have been the drawbacks or risks?
The initial production testing was typically done by real ticker symbols that are out of the money, like ‘buy IBM for a Dollar’, which has some limitations and fat finger figure problems. If you accidentally sell for a dollar, your order is going to get filled, and this can create substantive risk. Some exchanges then implemented test symbols, like NASDAQ’s ZVZZT, but not all exchanges have agreed to use test symbols. Production testing is difficult at the best of times and as it is not just about getting a fill on a test symbol; all the other issues, such as getting market data to trigger risk limits, determining if you are 10% off last fill price to trigger warnings for bad fills, flagging trade-throughs, creating testing for locked or crossed markets, etc – all of these are difficult without a truly live environment.

What has emerged now is a parallel environment using real stock symbols – real market data (although it is probably delayed in most cases) you are not trading in a live environment. This factor has emerged not just on the exchange side but also in back office systems like Omgeo. The other element of test symbology that we are trying to work out is a true end-to-end solution and quotes, routing, executions, allocations and settlement. In the past, you could not use the Internet, so you had to get a whole new set of circuits to NASDAQ’s test system.

Technically speaking, how does the test symbol fit into the normal FIX message?
The FIX part was easy because it looks and behaves like a regular symbol. Getting everyone to understand that this is a test symbol is hard. For example, when we test in production with ZVZZT, there are many systems downstream from order routing that need to ignore test orders; compliance, dollar amount checks, OATS reporting, other SEC and FINRA reports that all need to exclude risk symbology. Buyside traders who want to test their systems often cannot create an order without initiation from the portfolio manager, thereby restricting them from creating a ZVZZT test order. Technically speaking, adapting the FIX message for test symbology is simple, but the surrounding elements will take more work to align.

What changes need to be made to broker systems to incorporate test symbols? At the exchange?
The buy-side will probably rely on their OMS vendors or alternatively they can create a dummy account with dummy cash that they do not have to report to accounting. While the buy-side can handle that more easily, on the sell-side, we are required to modify a number of systems to handle test symbology and exchanges have to adjust their systems to not report OATS and executions if they have a test symbol. Exchanges also pay for quotes on filled orders, as a part of a revenue-sharing deal for market data dissemination. This would be impossible with ZVZZT orders, else everyone would build their own matching system and send in endless test orders.

Everybody has to make the business logic changes so NASDAQ initially had 30 different test symbols beyond ZVZZT, and NYSE had TESTa and TESTe, so any time that the symbols changed, there was a considerable amount of code that had to be updated.

  At the FIXGlobal Face2Face Forum in Seoul, Korean firms announced the formation
of a FIX working group and the Korean Exchange’s intention to build an ultra low
latency trading platform.

The opening speaker at the FIXGlobal Face2Face Forum Korea was keenly anticipated by the 200+ delegates, (a quarter of whom were made up of the buy-side and a third the sellside), as he was raising many of the issues that surround the HFT arena, but that are rarely touched on at industry events in Korea. By placing HFT in context , Edgar Perez, author of the recently published “The Speed Traders”, highlighted many of the opportunities and challenges that markets around the world face, in the low latency trading strategies environment. Not least, he pointed out the colossal task facing regulators and associated technology costs, just to monitor high-frequency trading, post trade, let alone real-time.

A recurring theme throughout the day, latency was covered by most of the presentations, especially in the context of FIX. Deutsche Borse’s Hanno Klein, and NYSE Technologies Asia Pacific CEO, Daniel Burgin, stressed that FIX standards are quite at home in the low latency environment, with exchanges around the world already using FIX for their low latency systems. As Mr. Burgin pointed out, “FIX is not slow, but through poor implementation, it can be made slow – and this has happened in various markets”. These comments rang true with the attendees, especially as Mr. Kyung Yoon, Division Head of Financial Investment IT Division of KOSCOM, outlined their plans not only to implement the latest version of FIX at the Korean Exchange, but also that when the new exchange system is rolled out in 2013, that speeds as low as 70 microseconds will be their benchmark. To the ‘icing on the cake’ Mr. Yoon then expressed KOSCOM’s commitment to helping establish a FIX liaison group in Korea that will ensure a highly ‘standard’ implementation of the FIX Protocol.

MC for the day, FIXGlobal’s Edward Mangles, (also FPL Asia PacificRegional Director), welcomed the announcement, stating that he and the FPL Asia Pacific group, looked forward to working more closely with KOSCOM, KRX and the Korean trading community as a whole. With delegates staying put to hear the bi-lingual presentations/discussions throughout the day, (with a few afternoon speakers actually commenting that the crowd in the room was unusually large for the final sessions), the updates on algorithmic trading (Josephine Kim, BAML) and TCA (Ofir Geffin, ITG) provoked a number of follow-up questions and discussions, indicating the delegates’ appetite surrounding these issues.

RCM’s Head of Asia Pacific Trading, Kent Rossiter, unmasks the Asian trading scene, sharing insights into how RCM navigates the unlit landscape, identifying the effects of dark liquidity and highlighting ways brokers can facilitate better buy-side decision making.

FIXGlobal: What are the main benefits of dark liquidity in Asia?

Kent Rossiter, RCM: One of the major challenges in Asia has always been accessing liquidity without other parties in the market taking advantage of your position and your need to complete the order. In cases where liquidity is scarce, knowledge that a relatively large order is being worked can expose investors to various risks. In such situations, it is  advantageous for knowledge of the deal whilst it is being worked to be discreet until the order is filled. In dark pools run by brokers we can get priority on our orders through queue-jumping.

Kent Rossiter, Head of Trading, RCMDark pools support such an approach as they allow large block orders to be worked without showing size. In this way, trading in dark pools allows a trader to access a broker’s own internal order flow, without being gamed by the market that would otherwise risk non-fulfillment or less efficient pricing. As a result, size trading becomes the norm in dark pools and a trader gets to see blocks that may never have been available otherwise. With no information leakage we are not disadvantaged by the fading you see on lit venue quotes. From a personal perspective, the challenges that arise from dealing across a number of venues and the resulting increased use of technology make the role more exciting and satisfying.

FG: How do you limit information leakage in dark pools?

KR: With the exception of broker internalization engines, the trade sizes found in dark pools are often multiple of what they are on the exchange. So having fewer, but larger prints reduces information leakage, and in many cases we can get done on our size right away. Minimizing the number of times a print hits the tape reduces the chance of this footprint being picked up and working against the balance of your order. That said, broker internalization engines do their part well, keeping any spread savings among the two broker’s clients instead of giving it up to the general market.

FG: If you decide to seek dark liquidity, how do you decide between broker internalizers and block crossing networks?

KR: The type of dark venues being used for various trades (i.e. between block crossing networks and brokers) are different. As I mentioned, brokers for the most part are matching up little prints that otherwise would have been time-sliced in the general market, and when using these venues the goal is often to save a few basis points along the way while you work an order. You are not often micro-managing each fill, but through the process we are getting spread capture and price improvement. The type of stock you are often trading in these internalization engines are often larger, more liquid stocks; the type of orders often worked by algos.

Block crossing networks on the other hand, while still matching up electronically, are probably more confidential, and take up the function of what brokers still do upstairs - putting blocks together - so size is the real focus here. Both types of dark pools use the primary market for price sourcing since the vast majority of trades get printed at or within the best bid and offer. As the primary markets become too thin, it can cause price formation problems.

While it is not specific to the consideration of dark pools as an extra execution venue, we have to consider potential increased book out costs if we do use dark pools (except via aggregators, since we would only be using one counterparty), just as we have had to for years when deciding whether to execute a block with a single broker versus multiple counterparties. As dark pools proliferate there is an increased chance that we may not have part of our order in that pool at just the right time to take advantage of flow that may be parked there. Dark pool aggregators are aiming to provide the buy-side solutions to this.

ITG's Clare Rowsell discusses the advantage of unbundling for portfolio managers and how it improves services for end investors, touching on global models f

ITG’s Clare Rowsell and Rob Boardman outline the best practices for liquidity management across multiple regions, focusing on Asia Pacific, North America and Europe.

In an increasingly global and fragmented trading environment, finding and managing liquidity is the top priority for buy-side traders. The practicalities of doing so are complex, and are underpinned by the tradeoff between the time taken to find liquidity – which can result in delay costs as the price moves away, and the quality of that liquidity – trading against certain counterparties can increase market impact costs. Meanwhile, the global liquidity environment is changing rapidly due to evolving regulation, market structure and the trading tools available. What follows is a short summary of some of the most significant developments affecting liquidity management in different regions around the world.

Asia Pacific

Often cited as having a ‘last mover advantage’ in coming latest to the world of dark pools and alternative trading venues, Asia is now catching up rapidly. Growing awareness of the region’s higher trading costs (approximately one third higher than those of the US and UK) is creating market demand for both new lit and dark liquidity sources. Japan is the only major market that currently allows ‘lit’ or quote-publishing venues to compete directly with the exchanges, and in the past year market share on these venues (including SBI Japannext, Chi-X and Kabu.com) has risen, although they still average around 2-3% of total turnover.

Australia will be next, now that the launch of Chi-X to challenge the ASX exchange’s monopoly has been confirmed for early in Quarter 4 2011. As alternative lit venues develop, the importance of smart order routing grows and in Australia this has been a core component of consultation which will result in changes to regulation affecting brokers and exchanges and mandating Smart Order Routing (SOR) as a mechanism to achieve best price in a multi-market environment. For other Asian markets, buy-side traders have been turning to dark pools as a way of managing trading costs and finding quality liquidity.

Most of the large banks and brokers now offer a dark pool or internalization engine in markets including Hong Kong, Japan and Australia; but given Asia’s already-fragmented market structures, adding more broker liquidity pools threatens to complicate the buy-side trader’s life. This is where liquidity management, and specifically the aggregation of dark pools, is coming to the fore. Increasingly the buy-side are turning to dark pool aggregating algorithms to connect into multiple sources of liquidity through one access point.

Canada

Canada has long benefited from trading in an auction market supported by a highly visible electronic book. Even though it was not until the latter half of the decade that ATSs began to spring up in Canada, they quickly gained traction and in 2010 ATSs represented 34% of volume. As these changes have taken place, Canadian regulators have continually reviewed emerging regulation in other regions as Canada continues to parallel more mature markets. With the proliferation of alternative trading venues came an emphasis on the consolidation of data to ensure market integrity. In addressing the need for a consolidated tape, the CSA accepted RFPs and appointed the TMX Group to the role of Information Processor.

Also arising from the multiple-market trading environment is Reg.NMS-style regulations to protect against trade-throughs. February’s Order Protection Rule shifted the best price responsibility to marketplaces and also requires full depth of book protection (unlike the US’s top of book protection). About 3% of Canada’s equity trading is done in dark pools, and although Canada has only two dark pools (Liquidnet Canada and ITG’s MATCH NowSM), Instinet plans to open two this year and Canadian stock exchanges are making moves to offer dark order types.

What a lot can change in a year! Since the last FPL Canada conference, held in May 2008, Canada has been drawn into the liquidity crunch along with the rest of the world. Yet Canada has a risk and regulatory model that is different from many of its established trading partners, most notably the US and the UK. Can the world learn lessons from the Canadian experience?

With only weeks to go until Canada’s leading electronic trading event, it is still hard to pick what the credit crisis and regulatory environment will look like on June 1st, the first day of the conference. What we do know is that there will be increased regulatory involvement, particularly in areas that were previously not subject to scrutiny. In the run up to the event, we asked a range of experts to comment on what they feel will be the hot topics at this year’s event.

Conference Hot Topics

(A) Market Volatility
Market volatility has certainly changed trading patterns. The increasing reliance on electronic trading, leveraged through Direct Market Access/Algorithmic Trading or a portfolio trading desk, is directly connected to the growing need to manage risk, volatility and capital availability. We have seen a dramatic uptake in these services/tools, as there has not only been a focus on how electronic trading is conducted, but also on the expectations of trading costs involved versus benchmarks. The greatest impact has been a higher use of electronic trading strategies relative to more traditional trading and a shift in the types of electronic trading strategies employed.

From a single stock perspective, many traders were loath to execute at single, specific price points due to the potential for adverse percentage swings in the high single to double digits. Algorithms have been employed on a more frequent basis, to help traders participate throughout intervals on an intraday basis, managing risk around the volatility. The violent intraday swings also create significantly more opportunities in the long-short space. Quantitative execution tools have became more of a focus, to take advantage of these opportunities on an automated basis.

What the industry is saying:
“In terms of disruptions relating to market volatility, the Canadian trading infrastructure generally held up admirably. Most dealer, vendor, and marketplace systems handled the massive increases in message traffic and activity with little noticeable impact on performance. This is proof positive that the investment in capacity and competition was well worth it and is now paying dividends.” Matt Trudeau, Chi-X Canada

“Electronic platforms using FIX and algorithmic routers handled significant market fluctuations with no impact to performance. Speed to market for orders made it possible for traders to minimize exposure to huge swings in pricing and to capitalize on opportunity.” Tom Brown, RBC Asset Management

“Many traditional desks were shell-shocked and did not know how to respond to the volatility combined with the lack of capital. Electronic trading tools like algos enabled people to manage extremely volatile situations with great responsiveness. They were able to set the parameters for their trades and let the algo respond as market conditions warranted. Trading of baskets/lists made having electronic execution tools critical. You couldn’t possibly manage complex lists in real-time without very sophisticated electronic front-end trading tools.” Anne-Marie Ryan, AMR Associates

“The recent volatility spike means that risk will likely be scrutinized more in the future than in the past. Post-trade transaction cost measurement systems generally do not consider risk but instead focus on cost. To properly align the interests of the firm and the trader, performance measurement systems will need to reflect both cost and risk considerations.” Chris Sparrow, Liquidnet Canada

Jenny Tsouvalis of Ontario Municipal Employees Retirement System (OMERS) sees a need for effective integration of investment management and trading processes. “On-line, real-time electronic trading systems provide quick access to liquidity and when coupled with real-time pricing embedded into blotters, identify the effect of market changes on the portfolios and the effect of trading decisions.”

“Electronic trading has been successful because of its ability to be adaptive, so it is likely to change in reaction to current issues.” Randee Pavalow, Alpha Trading Systems.

“We’ve seen an increase in the use of algorithms and over the day orders as volatility has increased. The ability to smooth orders over a longer period limits the exposure to price swings during the day. VWAP, TWAP and percentage of volume, seem to be the algos of choice for many these days.” John Christofilos, Canaccord Capital

(B) Algorithms and Smart Order Routing

Smart order routing is still relatively new in Canada; however alternative trading systems and exchanges are now becoming part of the trading landscape. While the technology solutions are there, effectively deploying them in Canada requires further development. Presentations at the conference will focus on methods to source liquidity at the primary exchange and via the five alternative trading venues.

What the industry is saying:
“Significant progress has been made in multiple market connectivity and smart order routing capabilities during the past six months, but there is still a lot of distance to make up compared with other jurisdictions. Participants need to have greater flexibility and control when it comes to order routing.” Matt Trudeau, Chi-X Canada

“The inability of secondary trading venues to accommodate volumes and provide liquidity during primary market disruptions, raised questions as to secondary providers having sufficient connectivity to all market participants and the lack of price discovery transparency.” Tom Brown, RBC Asset Management

“Algorithmic trading technology really proved itself during a primary market outage. Clients were able to execute their strategies on Canadian inter-listed stocks seamlessly. Orders were posted in the United States, and if better prices were available in Canada, the algos grabbed them. However, few clients were willing to post bids and offers in alternative markets when no one else was.” Lou Mouaket and Graham Mackenzie, CIBC World Markets

“Electronic Trading, like traditional trading, is at the mercy of the exchanges being able to post bid and offers and execute orders on a timely basis. Once that connection is disrupted, the ability to order route to other markets through a “Best Market Router” becomes more important. Within a multiple market environment, the ability to execute client orders on other markets has become a must for dealers and clients.” John Christofilos, Canaccord Capital

Can you

Imagine a seamless flow from the opportunity through the trade, the fill, matching, settlement and confirmation. Now imagine this across multi-assets and multimarkets. RBC Asset Management’s Tom Brown thinks this reality is closer than we know using a flexible combination of OMS, FIX and EMS.

Imagine you are on the trade support desk, within your trade room, of a buy-side firm monitoring order flow. One of your Portfolio Managers has seen an opportunity flash on his desktop via an instant message from the head equity trader. He determines a buy of 50,000 shares should be executed for five portfolios. The Portfolio Manager enters a buy order in the order management system and sends it to the trade desk with the click of an icon. The equity trader picks the order and sends it to broker “A” as he was making the market.

The order comes back as filled to the trade desk and populates in the blotter. The order moves to ready status as a fully filled order, allocates across five portfolios and moves from the trader blotter to the trade support blotter. You now pick up the order and review details of the trade for accuracy. Having completed the review, you select the order and hit the icon for “prep post-trade” which applies the standard settlement instructions (SSI) to the trade. Having attached the SSI’s to the trade you hit the “send post-trade” icon and send the allocations and details of the order to the broker’s back office.

Your counterpart at the dealer will pick up the allocation and detail report. After reviewing for accuracy and confirming data points are complete, he sends back an “acknowledged” message that hits your blotter and changes the status of the trade from ready to matched/affirmed.

With the trade complete, you grab the finished trade and hit the send to accounting button, that sends the trade downstream. The trade flows to your book of records as a completed trade. It will also flow, at the same time, as a matched trade to your custodian who will pick up your trade across the five portfolios and process them as matched trades routing to your custodial accounts and through another stream funnel to the depository to complete the full trade cycle.

Imagine all those touches and the number of people involved, and then realize the whole cycle took less then five minutes to complete.

But why stop here? Why not the same functionality for the money market, fixed income, foreign exchange and derivative desks? A step further: all markets and all asset classes, globally. How do we proceed with flow and process?

Institutional Trading
A fully functional order management system (OMS) is essential to such a global, multi-asset, vision. This does not, however, preclude other levels of flow being developed, but you may risk gaps in compliance checks, limitations to the type of messaging or other aspects of the cycle. Let us review both scenarios.

We determined through discussions with our Institutional OMS vendor, Charles River Investment Management System (Charles River IMS), that for our purposes of developing “one stop processing”, fully integrating the application with access to the appropriate modules would move us towards this goal. We already had some of the tools built during our initial rollout of the application. For example: Pre-trade compliance and segregation of duties for user functionality allows an order to have breaks during flow that enable the various participants to perform their tasks in the cycle.

Portfolio Managers are able to trade a single name through their blotter or pass multiple orders through model changes per bucket. The biggest advantage is the ability to send program trades covering 100’s of orders from the managers workbench with a few key strokes, passing through compliance and conducting mandate checks verifying trades are accurate within seconds.

Once the orders hit the trade desk, the same ability allows our traders to grab one order or a whole program of orders and send them to "The Street" within seconds, to one or many dealers via the Charles River FIX network. This allows the desk extra time to work more difficult orders or simply to get orders to market in an efficient, timely manner for our dealers to vet.

Next was incorporating the right modules that would interface with the blotter builds we completed for trade support and back office functionality. Allocation and trade match modules added the ability to accept executions and breakdown the trade details in a manner that made the information usable for back office requirements, again using the FIX network. Since we trade at the bulk level, yet allocate at the portfolio level, this additional flexibility allows us to match with bulk numbers and also break out the order at the detail level for the allocation reporting and matching.