Algo Vendor To Move Into Risk-Taking

Deep Value, a Chicago-based vendor of equity algorithms, is expanding beyond both its equity and vendor roots. With the recent addition of a new partner with buy-side experience, the firm plans to start trading credit products, currencies, and interest rate products. Deep Value has no plans to abandon equities, but sees opportunity in trading and entering into buy-side work in other asset classes.

New partner Andreas Koukorins most recently worked at the hedge fund Fortress Investment Group as its chief credit strategist and senior portfolio manager. In joining Deep Value, the goal is to marry Koukorins background in quantitative research with the vendors computing power. Deep Values algorithms are used by hedge funds and brokers alike-including those on the floor of the New York Stock Exchange-and trade between 1 percent and 2 percent of average daily volume, according to the company.

Koukorins and Deep Value chief executive officer Harish Devarajan-once the chief operating officer on a Deutsche Bank prop desk-both see potential in the radically changing world of swaps. With new regulations pushing swap trading onto exchanges, the opportunities in electronic trading are attractive, according to Devarajan. This is a slightly new approach, he said. We know how to trade. We know how to do research. We know how to technologize both the trading and the research. So, we are taking those skillsets and applying them to, especially, these newly electronic asset classes.

In equities, Deep Value pushes large quantities of market data through server farms that perform analytics to arrive at trading decisions. It hopes to replicate that process in the fixed income space, taking advantage of the availability of tradable data from the new exchanges.