UNX-Supplied Equities Platform Drives Basket Trading at West Coast Hedge Fund

Ohana Limited Partnership, a Santa Barbara, Calif.-based hedge fund with $16 million in assets under management, is using an electronic equities trading platform from Universal Network Exchange (UNX) to buy and sell baskets of stocks. Currently, Ohana relies on the vendor's smart order routing engine to trade roughly 4 million shares per month.

Doug Wilson, general partner at Ohana, says that the firm has used UNX's software to create 10 different portfolios--each comprised of a basket of 50 stocks. "What UNX does for me ... is allow me to create my own indexes and weight them the way I want to weight them," he says,

In a typical month, Ohana performs four round-turn trades per basket, with an average size of 1,000 shares for each of the 50 stocks in a basket. But the firm does not choose its execution destination. Instead, it relies on UNX's smart order routing engine, which electronically searches for the best match for a buy or sell order among multiple execution destinations--including a variety of electronic communications networks.

That engine is important, Wilson says, because it enables Ohana to quickly find a match for its average 50,000-share order. "I don't partially get in or partially get out, I buy or sell the whole basket," he says. "With E*Trade or whatever, you're typing in symbols and shares. But with UNX, you hit the buy or sell button and your whole portfolio system gets dumped simultaneously."

Wilson is most impressed with the speed and efficiency of UNX's executions. Over the past couple of months, he says, UNX has actually decreased the average time it takes for them to deliver a fill to Ohana--from two minutes to less than one minute. Simultaneously, Wilson says, the firm has also benefited from price improvement. "I've been a trader for 15 years, and the longer a trade takes to get filled, the more trouble you're in ... as far as your price is concerned," he cautions.

The only real complaint that a client could potentially log against UNX, Wilson says, is that the vendor's commission is too high. Today, Ohana pays UNX a commission of 2.5 cents per share. However, Wilson says the commissions the firm pays are immaterial in comparison to the quality of the executions it receives. "The bottom line is that if your execution is good, your commission is not important," he says. "Execution can destroy you far worse than a commission can ... and the execution at UNX is superior to anything else that I've seen."