As automated trading strategies continue to sweep through Wall Street firms, everyone wants to get in on the action. The buy side is almost entirely on board, with larger firms making immense technology investments to be able to participate in computerized trading strategies.
But for smaller firms, the costs involved have been prohibitive, leaving many out of the game. Nexa Technologies (booth 3200), a division of Penson Financial Services, wants to change that with its newest offering. The Irvine, Calif.-based direct-market-access provider has partnered with New York-based InfoReach to release an application service provider-based trade management system under Nexa's product line.
"The ASP model really opens the door for some customers that weren't able to make the investment before," explains Nexa President Eric Stoop. "It's a more cost-effective package because they don't have to set up all of the infrastructure such as data feeds or servers. It's addressing a whole new market."
Mark Munoz, Nexa's SVP of corporate development, notes that the deal is a natural progression for Nexa, whose clients had begun exploring the next steps in electronic trading. "Our clients started off trading single orders but have gotten into automated trading of large baskets," he explains. "Their activity on a per-trade basis as well as a per-symbol basis increased. They need tools to enable them to manage those trading strategies."
Instead of taking the time to develop those capabilities internally, Nexa turned to InfoReach, an established electronic-trading vendor, and tweaked its portfolio trading system to produce it as an ASP for Nexa. Says Stoop, "It fills a hole we had in our suite of products. The combination of what we do with ASP models and InfoReach's feature set made it a natural fit for our customers."
Mary Knox, Gartner's research director in investor services, believes the partnership is symbolic of a larger industry trend. "Smaller-scale firms want to deal with a more limited set of vendors for their technology management," she says. "But at the same time, they want best-of-breed functionality," which is easily achieved by an acquisition or partnership with an expert.
Like a Portware or FlexTrade, Nexa's new broker-neutral trading platform enables institutional buy-side and hedge fund traders to trade, monitor and manipulate large baskets of equities in multiple markets and asset classes. The capabilities include order routing, pre- and post-trade allocations, automated algorithmic execution and real-time position monitoring, according to Nexa. The application need only be downloaded and, utilizing user IDs and passwords, a firm can place trades and track its progress on a charting feature, Munoz relates. The tool also has an API for users to write specific algorithms if necessary, he adds. "If somebody wants to write their own VWAP, we have the capability to let them write it directly," Munoz says.
Since the product is offered as an ASP, users easily can couple it with other technology systems, Munoz contends. "This is a pretty simple out-of-the-box solution that allows a smaller firm to cut out a lot of the infrastructure associated with automated trading," he says.