Veteran trading and clearing executive Doug Engmann’s San Francisco-based introducing brokerage SageTrader has opened a satellite office in New York, hiring two former executives from ED&F Man.
Spearheading the east coast initiative are Sean Malloy, SageTrader’s head of sales, and Matt Shatz, the firm’s global head of clearing and execution. Both execs did stints at ED&F Man, a trading and clearing house for professional traders. Shatz spent two years there. Malloy spent less than a year. Previously, Malloy worked at Penson Financial, another execution and clearing firm for professional traders, for about five years.
“I joined SageTrader along with Matt Shatz to market a focused execution-clearing offering for mid-sized proprietary traders and hedge funds trading options, equities and futures, including portfolio margin accounts,” Malloy said in an email. “If you read yesterday’s Wall Street Journal, there was an article that shares are moving less in tandem than at any time since the financial crisis, suggesting a return to stock picking. We see this leading to a better trading environment for the customers we are looking to service.”
Introducing brokers generally provide investing advice, but do not handle transactions. They make trading recommendations while delegating the task of executing trades to someone at a different firm or a firm with a representative on a trading floor. The IB will usually splits the fees or the commissions with the firm or person executing the trade.
The expanded SageTrader will go after mid-sized hedge funds. These clients typically are being shown the door at numerous bulge bracket firms because they don’t generate enough business, Tim Taylor, a senior advisor with SageTrader, told Traders Magazine. He said the biggest firms only “want the larger end fund with a minimum account value of $5 million to $20 million.”
Taylor added that SageTrader can make money on funds and highly active traders that have between $1 million to $5 million and need risk management tools. “Customer portfolio margining is our specialty,” Taylor added. “We have a proprietary margining system that can monitor risk on a daily basis.”
SageTrader was formed in late 2012 and is the operating subsidiary of Sage Brokerage Holdings. The parent company was founded by Engmann, who has been in the brokerage and trading industry for some 35 years. Last October, he raised $2 million in a Form D filing, according to Securities and Exchange Commission documents.
Engmann co-founded Sage Clearing Corp. in 1982 to service the needs of options market makers. In 1997, he became the chief executive of ABN AMRO’s global professional trading and clearing operations after the Dutch bank acquired Sage. In 2004, Engmann left ABN AMRO when it sold the clearing unit to Merrill Lynch.
From 2005, Engmann spent three years as head of North American equities at clearer Fimat (later Newedge USA) when that clearer purchased the Preferred Trade brokerage from Engmann and his brother. During his tenure at Fimat, Engmann introduced portfolio margining to the U.S., according to SageTrader officials.
After departing Newedge in 2008, Engmann has stayed mainly on the sidelines, running a family office, and taking board roles at a couple of San Francisco technology vendors.
Senior management at SageTrader come largely from Engmann’s past ventures. Al Cooper is chief executive. He worked for Sage Clearing, ABN AMRO Sage and, finally, Merrill Lynch Professional Clearing. Mike Perrando is chief operating officer. He worked for Preferred Trade and Fimat/Newedge in a variety of capacities.
SageTrader is offering the proprietary Sage System reporting, clearing, margin and risk software which had been used by Sage Clearing’s options market maker and Fimat/Newedge portfolio margin customers.
SageTrader will make available execution management systems from six brokers or vendors, including the RealTick, InstaQuote and Neovest platforms. In addition, it will offer custody and clearing services through Merrill Lynch Professional Clearing Corp. and Wedbush Securities. All futures are cleared at ED&F Man Capital Markets.
SageTrader is “considering” the possibility of clearing its own trades, according to Taylor.
Of the new hires, Engmann noted in a statement that the former ED&F Man business “mirrors what we are building at SageTrader: cost effective and service oriented execution and clearing for mid-sized proprietary traders and hedge funds trading options, equities and futures, including portfolio margin accounts.”—Additional reporting by John D’Antona Jr.
