With money management firms taking advantage of new, alternative pools of liquidity such as ECNs and crossing networks, the job of the buy-side trader has morphed into a much more proactive role. Whereas the trader once routed orders to four or five broker/dealers, his "go-to-guys," the alternative trading system has opened up a realm of infinite trading possibilities and...headaches. More emphasis is now placed on the trader to "walk-through" a trade, rather than relying on the machinations of those brokers. Freedom, as it frequently does, has ushered in more responsibility.
Answering the call, order management system vendors such as Décalog and the MacGregor Group are developing "intelligent" links to alternative trading systems (ATS') that afford buy-side traders more control over their trading strategy. According to Dushyant Sharawat, a TowerGroup consultant, these links are inevitable if the buy side is to maximize the use of the ATS'.
"This is the second stage, what we call the second level of connectivity that these vendors are building," explains Sharawat. "Large buy-side firms, the traders, are saying it's not just enough to send 10% of my trades to be crossed at Posit. They are asking, how do I send those trades down in an automated fashion, and incorporate that decision into my overall trading strategy?"
Sharawat says he believes that Décalog and MacGregor are the only two vendors working currently on such communication mechanisms, but he expects that others will do so soon if they plan to compete for the top-tier portfolio and fund managers.