Brokerage firms are integrating their algorithmic-trading strategies into order-management systems (OMSs) to make their quantitative models accessible to buy-side customers. Over the past few months, leading sell-side players - most notably Credit Suisse First Boston, Goldman Sachs and Morgan Stanley - have created interfaces with OMSs, as well as with direct-access and program-trading systems, while newer entrants like Banc America Securities and JPMorgan have also jumped on the algorithmic bandwagon.
Brokerage firms that have used these quantitative strategies on their own proprietary trading desks are now pushing the algorithms directly out to clients via front-end systems. The trend reflects buy-side firms' use of algorithms to carve up large trades into smaller orders and then to execute them according to strategies that minimize market impact.
Manny Santayana, director of advanced execution services (AES) for the Americas at CSFB in New York, says, "Channels of distribution for AES products are aggressively seeking us out in order to add value to their own products." So far, CSFB has integrated with Bloomberg, Macgregor, Charles River, LongView Trading Systems, Lava Trading, Reuters, Bridge and TradingScreen, a risk-management system. In addition, it linked its algorithmic-trading servers into Portware and FlexTrade Systems - which are widely used for program trading and also allow buy-side and hedge-fund clients to write their own algorithms.
Brokers are linking to OMSs via the Financial Information Exchange (FIX) protocol, which lets users enter variables that tell the algorithmic server how to behave. CSFB provides either a straight button into the OMS or what it calls the AES Dashboard, a FIX specification embedded into its existing OMS that gives clients more intimate control over the order, according to Santayana.
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio