Nicolas Colas
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14 Facts About Markets in 2019

Nicolas Colas, co-founder of DataTrek, shares hiss examination of the 14 facts prevalent to him in this year's financial markets.

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If Members Exchange (MEMX) gets SEC approval and launches, do you think it will force downward pressure on market data fees?

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April 1, 2011

Cover Story: Converge & Diverge

By Peter Chapman

Eric Morgan, head trader at mid-prime brokerage Merlin Securities, echoes Lee. His firm offers its customers several EMSs to choose from, including REDIPlus, RealTick, Bloomberg EMSX, Neovest and InstaQuote. Morgan said that all EMSs handle equities well, but if a trader wants to branch out into options and futures, the field narrows. "Let's say you have an options trader doing multi-legged trades," Morgan said. "Some systems are better at it than others."

To match a trader with the appropriate system, Merlin's product specialists will interview the trader to learn which asset classes he trades, suggest a platform and then set up a demonstration.


On the Margins

For the suppliers that have largely built out the core "multi-everything" platform, any new additions of functionality are increasingly on the margins. A minor foreign stock exchange here. A trading strategy there. A little compliance reporting.

Thomas Kim

Goldman, for instance, has invested in cross-asset trading, allowing REDIPlus users to trade over-the-counter interest-rate products against listed futures in spread fashion. Although some brokers are providing similar functionality through algorithms, the GSET offering is a part of the REDIPlus platform. The technology transforms what would ordinarily be a very manual and inefficient process, Nangalia said.

"It is projects like this that let us differentiate ourselves," he added.

FlexTrade has also added cross-asset trading. Last year, it introduced an algorithm that lets users trade two different securities denominated in two different currencies. "Cross-currency functionality in electronic trading is increasingly important in today's global and interconnected markets," said FlexTrade president and chief executive officer Vijay Kedia.

TradingScreen's Buhannic cited three areas of new functionality. The vendor will add trading in mutual and money market funds; further develop its analytics capabilities with an emphasis on transaction cost analysis; and develop ways to manage short positions for its hedge fund clients. "Because of regulatory changes, there is much more complexity around the financing of positions, especially for hedge funds," Buhannic said. "They need to report their short positions in multiple regulatory environments."

Buhannic contends the traditional money managers are a growing segment that could soon match that of hedge funds. He said 30 percent of TradingScreen's customer base is comprised of long-only asset managers, versus 45 percent hedge funds, and that its presence in the long only is growing, especially in the US.


See Chart: EMS Usage



Overall, hedge funds comprise 60 percent of the user base, according to consultancy Woodbine Associates, while traditional asset managers and pension funds account for 15 percent. Traditional money managers use EMSs to supplement the trading functionality they get from their order management systems.

Neovest, whose client base is dominated by hedge funds, is another vendor whose platform is largely built out. And as with TradingScreen and REDIPlus, new functionalities are appearing only on the margins.