Wedbush Securities is courting hedge funds, long-onlys, registered investment advisors and other buyside traders to use their new hyper-fast electronic trading infrastructure.
The platform allows the buyside to access the markets more efficiently by using this off-the-shelf system as opposed to developing their own. It also looks to put the buyside on equal footing with high-frequency traders who have their own speedy custom-made systems.
With 10 registered users already using the platform, the firm hopes to grow the number to upwards of 25 buysiders by the end of the year, according to Kevin Beadles, head of Wedbush Securities’ execution solutions group.
“We’re obviously trying to grow our user list,” Beadles said. “The buyside wants better and faster access to compete with the automated firms. We want to give it to them.”
One buyside trader who spoke with Traders Magazine said that while trading hyper fast on par with HFTs wasn’t his firm’s approach, it was important to know about tools such as Wedbush’s platform. As the trading markets continue to evolve and move faster, it’s crucial to know what tools are in the market to achieve best execution, he added.
“Any product that puts you on a more level playing field with your competitors and HFTs is important to know about,” the buysider said. “It’s another tool you have to be aware of and we’d be interested in learning more about.”
The buyside, he added, must examine anything that can help manage trading costs in today low trading volume environment, especially any algorithms a platform like Wedbush’s includes.
“You want to make sure your tool box has every tool or algo you need to keep up,” he said, “and you have to at least look at everyone’s product.”
The electronic trading platform comes from Lime Brokerage, a wholly-owned subsidiary of Wedbush that was acquired last year. This trading platform leverages Lime’s micro-second based trading system and pre-trade risk-checking software that takes less than 250 nanoseconds to run. A nanosecond is one-billionth of a second.
The thinking goes the faster the risk checks, the faster the buyside can compete with high-frequency and other speedy traders to get their orders filled. Wedbush’s market data infrastructure is co-located in data centers, while its execution connectivity is directly co-located at each exchange to enable the lowest possible latency.
“Users have the same access as HFT clients,” Beadles said. “The goal is to provide a level playing field and give the money managers or institutional accounts the same technology platforms and advantages that a lot of the low-latency firms have.”
The firm also offers users a raw data feed that requires only 75 microseconds for processing. Faster data processing translates into faster order routing and execution.
He added the platform had “a soft” launch earlier this year. Since then, Wedbush has increased its functionality by allowing customized algorithms to run on it, as well as more basic schedule-based algos such as VWAP and TWAP. Other algorithms within the platform include a direct market access algorithm, which searches for displayed and non-displayed liquidity and recalibrates real-time among venues, and DarkSweeper, which searches for dark pools for non-displayed orders.
“We can create and offer the buyside faster access through the system,” he said. Also, the buyside user can create its own execution network by outsourcing Wedbush’s infrastructure and adding its own proprietary programs. Three firms, Beadles said, are in talks to do this.
