CIBC World Market's Global Electronic Trading Services (GETS) is rolling out access to algorithmic trading strategies to all of its buy-side clients, including quants, hedge funds and mutual funds. The strategies will be hosted and maintained by Banc of America Securities (BAS).
Rather than absorb the expense to develop its own models and the direct-market-access connectivity to exchanges and electronic communications networks, CIBC World Markets, based in New York, opted for the service bureau model. CIBC was adamant about finding a broker to act as a pure technology service provider - one that would not require CIBC to trade in the other firm's name.
The firm entered the relationship with BofA Securities for several reasons. "No. 1, they had an established product; No. 2, they were willing to deal with us in the ASP [application service provider] model; and No. 3, we knew the people," relates Bruce Turner, head of U.S. equities trading at CIBC World Markets.
According to CIBC officials, BAS was the only firm both willing and technically able to allow CIBC to take credit for the order flow. "All the trading attribution to the exchanges falls under CIBC, which is different than some of the players in the algorithmic space," says Matthew Weitz, executive director, equities sales and trading for GETS.
"We're not using BofA [Securities] as a trading destination - we're using them to maintain and house servers and sell us software, which in this case has been labeled algorithmic trading," says Turner.
From BAS' standpoint, "It's a win-win for us to make the pie bigger," says Rob Flatley, managing director of electronic trading services at New York-based BofA Securities, which collects a small transaction fee based on the volume flowing through its pipes and models. "We don't charge our AlgoConnect clients for the up-front work to build the integration," adds Flatley. "Our success is tied to their volume. The more volume they do, the better we do." In the past two years, Flatley's group has built what he terms a "ConEdison plant." "I'm the guy with the screwdriver and the electricity," he says.
To distribute its algorithms, BAS has integrated its platform with 22 buy- and sell-side order management system providers.
"To the end customer, it appears that CIBC has done all the integration," says GETS' Weitz.
Because CIBC has a large Canadian franchise, the firm is cross-selling the service across the Canadian border for U.S. equities. In the future, the firm plans to offer algorithmic execution for Canadian equities, according to CIBC's Turner.
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