Unconventional hedge fund Maple Leaf Capital gets real-time risk management and seamless connectivity thanks to two of its vendors working together.
Maple Leaf Capital, a London-based hedge fund, recently came one step closer to straight-through processing when two of its vendors linked their systems. The new integration between Sophis, provider of Maple Leaf's portfolio and risk-management applications, and TradingScreen, provider of the fund's connectivity and trading platform, will alleviate the need for some inefficient re-keying.
"I think we were partially responsible for this link coming about," says Portfolio Manager and Chief Executive Officer of Maple Leaf Capital Michael Wexler.
Wexler says that when the fund, called the Maple Leaf Opportunity Fund, was launched in October, management looked at eight or nine different technology providers, "demoed a couple" and finally selected Sophis and TradingScreen.
Sophis was chosen because it allowed portfolio managers at Maple Leaf to see their risk in real time, a critical requirement when managing a "volatility-arbitrage" strategy. That strategy is used when one "extracts volatility from any equity instrument that has it embedded -- listed options, OTC (over the counter) -- We extract the volatility component of the asset," says Wexler, who refused to say how much the closed fund held under management.
Real-time-risk calculations are important for such a fund because of its complex strategy. "It is critical for us to see our risk in real time," he says. "Our risk is much higher than someone who trades infrequently. As our exposure changes, so does our risk, and we need to see that in real time, not 10 or 15 seconds later."
The connection will now allow for information from the TradingScreen platform, used by Maple Leaf to connect with its counter parties, execute orders, etc, to flow into the Sophis portfolio and risk-management applications.
Before the link was established, says Wexler, that information had to be transferred manually or re-keyed. "As anyone will tell you, that leads to errors. We wanted to cut that step out to save time and hassle," he explains.
Wexler says that link has allowed Maple Leaf managers to make "better use of our time. Anytime you are manually entering trades and transferring data, that is not an efficient use of your time -- You could be spending that time looking at the market and figuring out how to make money."
The cooperation between Sophis and TradingScreen should help Wexler get closer to his goal of STP. "This will decrease errors and generally contribute to having a state-of-the-art firm, as far as information and processing goes," he says.