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Placemark Automates Block Trades and Allocations With FIX Flyer

Dallas-based Placemark Investments, went live with FIX Flyer's online service for formatting equity block trades and automating the allocations that are sent back to the brokers offering these programs, the investment adviser announced today. With the boom in unified managed accounts for retail investors, Placema

Dallas-based Placemark Investments, went live with FIX Flyer's online service for formatting equity block trades and automating the allocations that are sent back to the brokers offering these programs, the investment adviser announced today.

With the boom in unified managed accounts for retail investors, Placemark needed a way to automate the tens of thousands of allocations it sends daily to sponsor organizations - ranging from small regional brokers to large wire houses.In an exclusive interview this week with Wall Street & Technology, Placemark executives explain how it tapped FIX Flyer's online service for trading and allocation management. Placemark went live with the hosted service in January.

"FIX Flyer has the flexibility to effectively plug into a sponsor's back-office trading system directly while we're trading blocks and allocating files to know how those files break down into accounts," says Brian Bleasdell, SVP of operations design at Placemark which currently manages just over $6 billion - and whose business experienced a fourfold increase in the past 24 months.

"Clearly, the UMA operating model requires significantly different level of capability both at the scale level and at the flexibility level as it relates to trading," says Bleasdell.

As a leading overlay manager for unified managed accounts, Placemark makes buy and sell decisions through a proprietary system to customize the individual accounts. UMAs are a type of separately managed account (SMA) where the investor holds every type of investment in a single account - including stocks, bonds, mutual funds, ETFs and even hedge funds. The overlay manager sets the asset allocation and adds a layer of customization by rebalancing the portfolio for tax reasons or to comply with other investment mandates.

"We actually make the buy and sell decisions at the account level, whereas the investment advisers make the decision at the macro level," such as to sell Microsoft and buy GE today, explains Bleasdell. Placemark figures out at the individual account level as to which account should buy how much and makes decisions at the tax level, he explains.

FIX Flyer then takes a custom file format from Placemark that comes out of its black-box system with regard to the portfolio rebalancing. "We take a huge trade file and we allow them to upload it over the Internet. We take that and aggregate the securities into different blocks. As soon as they upload the file, we will convert the file into FIX and aggregate the block order, [stage it] and route it to the broker of choice," says Brian Ross, CEO of FIX Flyer, a software company focusing on buy-side FIX connectivity and workflow automation for traders of equities, fixed income, options and futures.

Based in New York's Tribeca neighborhood, FIX Flyer was formed in 2003 by George Kledaras to develop advanced technology for managing high-volume, multi-asset institutional trading using the FIX Protocol. According to Ross, the FIX Flyer service is designed for thousands of trades a day and thousands of connections. It's currently handling 20,000 trades a day, and about half a billion dollars is flowing through the platform, including Placemark's volume, and those of proprietary traders and hedge funds.

"We deliver a lot of productivity to the new breed of traders and portfolio managers that need the ability to do this blocking and allocations," says Ross, noting that it saves them time and money. Placemark currently has three sponsors on the system, but could increase that up to 10 in the next few months, notes Ross.

According to Placemark COO Richard Dion, "The infrastructure that is in place today was really designed to support traditional SMA managers. What FIX Flyer helps us to do is take this new UMA operating model and let it operate on top of this SMA infrastructure," says the COO.

Dion adds, "The biggest function is on the allocation side of things." While the industry has standardized on FIX for the execution, Dion says, "Most of the sponsors don't take a FIX allocation message. They only take a proprietary message designed to connect with their back-office systems. The advantage of FIX Flyer is that it can customize the file from Placemark "to meet the sponsor's allocation requirement," he says.

Dion explains how the process works: "We upload a trade file that shows what trades need to be made at the individual account level. They [FIX Flyer] aggregate[s] them into blocks," he says. Then Placemark reviews the file and confirms that all the blocks were configured correctly. "We hit an execute button to confirm the block," he says.

The sponsors' systems will take the orders and execute and come back to FIX Flyer with a price and fill amount, explains Dion. Then FIX Flyer will hold the allocation file to the end of the day and send it to the sponsor based on the requirements that the process sets," says Dion.

"The end-of-day allocation process was time-consuming, and someone had to manage that with sponsors, whereas now it happens behind the scenes. They're handling that [for us] and they're handling that for the sponsors," continues Dion.

Because FIX Flyer can take a proprietary format from Placemark and customize it into a format that the sponsor recognizes, "We don't have to manage and configure its systems to send the allocations, says Dion. "Its better and cheaper for our sponsors," adds Dion.

In Placemark's case, someone with an SMA-trading function is monitoring the process across numerous sponsors and mechanisms, and FIX Flyer is one of them. In terms of saving time, "FIX Flyer's system is extremely fast to load and trade. It did cut down [the time] - in some cases from hours to simply minutes." In addition, FIX Flyer gives Placemark "a unified interface and mechanism to handle multiple sponsors," says Dion. 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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