When volumes skyrocket, it's time to call technology to the rescue. One buy-side firm found help in FIX.
Pzena Investment Management, a New York-based buy-side firm, recently decided to FIX-enable its trade-order-management system to keep up with growing volumes.
Over the past few years, Pzena has gone from $1.3 to $3.1 billion under management, making it imperative that the firm embrace technology to handle the sharp increase in trading. As a first step, Pzena went live on the Precision Trading order-management system from Indata at the beginning of 2002 and, just last week, acquired FIX functionality from an Indata partner, NYFIX (owner of Javelin).
Pzena, which trades with about 25 broker/dealers, didn't have to do the usual FIX testing with its counter parties because those firms were already part of NYFIX's community of FIX users, says Keith Komar, principal, portfolio administration, Pzena Investment Management.
"I just sent one test message (with each broker) and haven't had a problem yet," he says.
The addition of Financial-Information-Exchange capabilities will allow Pzena to communicate trade information with its broker/dealer counter parties more efficiently, obviating the need for traders to use the phone or fax, according to Komar.
The difference is that previously "a trader would get an order (from the portfolio manager) and get a broker on the phone, clock the order and then wait for a call back," says Komar. Then, following verbal confirmation of execution, the trader would have to key that trade into Omgeo's Oasys product which is used to communicate allocation information with the broker.
"Now that we are FIX enabled, we can completely do away with that phone call," he says. That means faster trade cycles, greater straight-through processing and less chances for human errors.
"We are working to get the human side out of processing trades," says Komar.
The post-Oasys portion of the trade cycle, or the confim/affirm process, which assures all parties to a trade are working off the same information, is still done on a manual basis at Pzena. Komar, says that the firm is automating the trade cycle one piece at a time and will look into Omgeo's solutions for automating the post-allocation piece of the puzzle when they become more clear.
Omgeo is currently offering its next-generation virtual-matching Central Trade Manager for international or cross-border trades but does not plan to have the U.S. domestic version available for at least nine months.
Komar adds that getting FIX-enabled opens a number of doors to his firm, including electronic-communication networks (ECNs) and other all-electronic matching destinations.