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Craving Cross-Asset Platforms?

Hedge funds are pushing the envelope into multi-asset trading, but will traditional buy-side asset managers follow suit?

Making Markets in Multiple Asset Classes
Multi-asset trading is sweeping Wall Street as hedge funds increasingly apply complex strategies across equities, fixed income, futures, options and foreign exchange. And, as hedge funds trade with a variety of strategies - including global macro, stock index arbitrage and convertible bond arbitrage - they are looking to consolidate market data, direct-market-access (DMA) trading and risk management through a single front end.

"Everyone is trying to get down to one screen that handles multi-assets, multi-currencies, multi-functions," observes Eric Goldberg, CEO of Portware, whose execution management system acts as a central platform for multi-asset trading. But, while the holy grail seemingly is to sit in front of one platform to trade global equities, fixed-income futures and options, the reality is that traders who track multiple asset classes often sit in front of four, eight, even as many as 12 screens.

So, the question is: Do traditional asset managers really want a single platform?

Martin Amann, a trader at Five Mile Capital, an alternative investment firm based in Stamford, Conn., that manages approximately $1 billion in assets, sits in front of four screens. But, he says, he wants even more because there is so much information to view. "We trade futures, mortgages, treasuries and agencies, and that's not easy to keep track of on one system," says Amann, a former foreign exchange trader who began trading fixed income in the past few years. "You have to get the right screens up and you have to watch everything," he explains. Still, he acknowledges that "It can be a little overwhelming at times, especially when the market is moving."

Despite the complexity of trading multiple products simultaneously, the trend is gaining steam, fueled by hedge funds, which now total 8,000 worldwide with $1.1 trillion in assets under management. Hedge funds, which are lightly regulated investment pools, have broad latitude to use multiple asset classes in their investment strategies. Under the heading of global macro strategy, "I know a guy [who trades] everything from oil to coconut seeds to fixed income to FX," comments Amann. Also, the adoption of electronic trading across equities, futures, options, foreign exchange and fixed-income markets is making it easier to execute trades that blend different asset classes.

Even in fixed income, which is less automated than equity markets and foreign exchange, "You see a gravitational pull toward single platforms," notes Daniel Doscas, senior vice president, business strategy officer and head of equity market structure within HSBC's equity division. As hard evidence, he points to expansion of Thomson's TradeWeb from cash government bonds into the credit side with corporate bond offerings and interest rate and credit default swaps. 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

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