Calypso Technology (San Francisco) now is offering its customizable trading system through a strategic partnership with Sky Road (Downers Grove, Ill.), a provider of hosted trading solutions. The joint venture is being marketed to hedge funds that trade across asset classes.
Calypso's trading solution currently provides large hedge funds with connectivity to and reconciliation with defined brokers, integration with market data providers, and disaster recovery capabilities. Prior to the joint offering, Calypso had been marketed primarily to hedge funds with more than $500 million in assets under management that had the IT capabilities to tailor and customize the Calypso solution to fit their needs.
Through the partnership with Sky Road, however, even small hedge funds that may invest across asset classes but do not have the time or infrastructure to implement and tailor the Calypso solution now can take advantage of it through the Sky Road Platform, which includes maintenance and technical support.
Over the past few years, many traders have created their own hedge fund shops under which they could do more cross asset trading, according to Gerard Rafie, VP of marketing at Calypso. "They don't have the infrastructure that a bank has to maintain such a large trading system," he says. Because many of these hedge funds can't afford the high price of integrating a new trading system and can't wait the long period of time it can take to do so - sometimes up to a year - they need an application service provider (ASP) that will do it for them at a faster pace, contends Rafie. "We give them a trading system that is preconfigured along with the service they require to get up and running quickly," he says.
The Natural Thing to Do
The idea for such a partnership came out of a long-standing relationship between Calypso and Sky Road. Sky Road, created in 2005, was spun out of the hedge fund Ritchie Capital Management (RCM), where John Borse, now CEO of Sky Road, was general partner and responsible for both IT and quantitative arbitrage. RCM had selected Calypso as the basis of its proprietary multistrategy portfolio management system.
"We then came up with the concept of spinning out the development team and offering customized Calypso software technology, plus our proprietary extensions, to other hedge funds," Borse explains. "By providing an ASP around it, hedge funds could simply connect over the Internet to run their Calypso-based Sky Road Platform and have us further customize that system for them."
In March, after a three-month implementation, VARA Capital Management was the first global macro hedge fund to go live with the Calypso-based Sky Road Platform. "VARA needed a flexible multi-asset ASP solution to enable trading of a diverse range of products and to provide integration with their prime brokers and others without a long implementation," Calypso's Rafie relates.
Cross-asset support was a critical factor for VARA, as was timing, because the firm had a narrow window for getting the system up and running before the launch of its new global macro fund, adds Dorie Boyce, director of technology at VARA. The platform offered VARA complete trade capture and profit and loss coverage for the firm's portfolio, he notes. "Additionally, our middle office has gained efficiencies through the automated trade workflows and reconciliation built into the Sky Road Platform, and going forward we hope to build on this ... to bring added integration and customization for our front, middle and back offices," Boyce says.