With the growth of high frequency trading among hedge funds and their demand for low-latency access to exchanges, Credit Suisse decided to take an equity stake in FTEN, a technology supplier, alongside three other brokerage firms.
Yesterday,Merrill Lynch, Goldman Sachs, J.P. Morgan and Credit Suisse announced a minority equity investment in FTEN, a provider of advanced risk management technology to hedge funds. Financial terms were not disclosed.
In an interview yesterday, Credit Suisse shed light on the reasons behind its investment in FTEN, which point to three factors. "An unusual combination of exchange real estate, state-of-the art trading and risk management technology makes FTEN a truly unique product with little competition, and that led the brokerage house to invest, according to Dmitri Galinov, director Credit Suisse Advanced Execution Services.
"Historically, FTEN was offering state-of-the art risk tools, but recently it moved into this whole game of buying up real estate near exchanges and offering low-latency, high capacity trading technology, and they have delivered," says Galinov.
Credit Suisse AES has been using the technology for the past eight months and offering it to its hedge fund clients in the high frequency trading niche.
In particular, FTEN has secured valuable real estate space in data centers with proximity to exchanges, which is increasingly hard to find. "When you are talking about trading, location, —i.e. proximity to exchanges — is a factor that can enhance performance. Sending an order to the exchange from a location within a few feet from the exchange's computer is more ideal than sending orders to them from greater distances," explains Galinov. "However, this space is limited," he says. "With FTEN— which has secured a tremendous amount of this space— Credit Suisse's AES is able to provide its clients with this very valuable real estate enhancing the overall trading service and performance that we can offer out clients," notes Galinov.
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