INSIDE: Dark Pools: Will Real-Time Reporting Do More Harm Than Good? P.16 Trading Floor Photos: Exclusive Images of Convergex’S Trading Floor and Technology

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INTELLIGENCE FOR THE ELECTRONIC MARKETS APRIL 2010

Buy-side firms are hard at work creating the trading desks of the future. York Capital Management, J.P.Morgan Asset Management and Northern Trust reveal plans for transforming their trading operations. p.22

INSIDE: Dark Pools: Will real-time reporting do more harm than good? p.16 Trading Floor Photos: Exclusive images of ConvergEx’s trading floor and technology. p.12

Gary Maier, CTO, York Capital Management

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Gary Maier, Chief Technology Officer, contents York Capital Management

April 2010 22 Building the Future Rather than wait for the next big thing to lift the capital markets out of their post-crisis funk,buy-side firms such as York Capital Management, J.P.Morgan Asset Management and Northern Trust are undertaking massive projects to transform their trading desks and emerge from these trying times more efficient than ever.

12 ANATOMY OF 16 ELECTRONIC A TRADING FLOOR MARKETPLACES Featuring:ConvergEx Group Exposing Dark Pools An SEC According to CEO Craig Lax, proposal intended to increase ConvergEx is a technology-driven transparency into opaque market company.On any given trading practices would require dark day,he reports,500 of the firm’s pools to identify themselves in customers trade electronically real-time trade reports.But would into all U.S.destinations and 52 the requirement do more harm markets around the world.Take an than good? exclusive look at the technology that the firm uses to support its 28 DIRECTORY clients’trading activities. Portfolio Risk Management Providers In today’s trading 12 14 ALGORITHMIC TRADING environment,risk management Deutsche Bank Algos Go to is more important than ever. The Head of the Class New AT’s latest trading tech directory managing director and head profiles many of the industry’s of equity electronic trading at top portfolio risk management Deutsche Bank Jose Marques is providers and their products, focused on developing ‘smart’ including details of the services algos to source dark liquidity. offered,the risk methodologies that are supported,the asset Tactical Trading Algo Raises the classes that are covered and more. Stakes Like a skilled poker player, Abraxas,a new tactical algorithm from ConvergEx,uses a multidimensional sensitivity profile to read market signals and determine how,when and where to trade. 16

ADVANCED TRADING • www.advancedtrading.com • April 2010 5 0410_05-06.qxd 3/9/10 10:21 AM Page 6

contents advancedtrading.com news opinions trading floors research videos

10 MARKET INTELLIGENCE Buy Side Algo Use,Block Trading On the Rise Buy-side firms expect to route nearly 40 percent of their share volume to broker algorithms in 2010,up from just 11 percent five years ago,according to a recent TABB Group study. They also expect to conduct more block trading.

SunGard Launches U.K. Broker to Fuel European Expansion Eyeing the FIDELITY LAUNCHES LIQUIDITY-SEEKING ALGOS high-frequency Dave Mishoe trading and Fidelity has introduced T-HAWK, a neutral strategy that identifies sponsored-access markets in optimal trading points based on liquidity, price and fair value of the Europe,SunGard launched stock; Adrenaline, an aggressive strategy that trades quickly and SunGard Global Execution Services, achieves high participation rates with minimal market impact; and a U.K.-based electronic agency Recoil, a momentum strategy used to augment Fidelity’s DarkSweep broker-dealer,to help U.S.clients expand into international markets. algorithm by identifying favorable price levels in the quoted market. advancedtrading.com/fidelity-algos 37 STREET CRED The Problem With New Short Selling Restrictions The SEC finally BLOG approved restrictions on short New Book Blames Quants for Crisis Should the average American with a 401(k) selling,but the new rules do not worry about the rise of quants on Wall Street? advancedtrading.com/quant-crisis satisfy either proponents or opponents of short sale curbs, INDUSTRY OPINION notes Contributing Editor Larry HFT Tax Would Curtail Deceptive Trading Taxing HFT firms would decrease Tabb.But before criticizing the disingenuous quoting,argue T3Live’s Sean Hendelmen and Brandon Rowley. regulator,consider the political advancedtrading.com/hft-tax pressure it has been under. TRADING FLOORS 38 AT THE CLOSE Cuttone & Co.View exclusive photos of the full-service institutional broker and The Volcker Rule Already Has Had prime brokerage service provider’s New York trading floor and technology. An Impact Though it is unlikely to advancedtrading.com/photos/Cuttone pass Congress in its current form, the Volcker Rule already is shaking DIRECTORY up the industry,says Editor-at- Execution Management Systems Our directory of EMS providers features details Large Ivy Schmerken. of more than 30 systems,including the order management functionality they offer and plans for future enhancements.advancedtrading.com/ems-directory 8 EDITOR’S LETTER Reader Advisory Board

Floyd Coleman Michel Debiche Peter Driscoll Brian Fagen Bryan Kievit Tim Olsen Rob Shapiro Joan Stack Jason Valdez U.S.Head Trader President and CEO Vice President, Cohead of Liquid Market Head Trader Senior Vice President/ Executive Director Trading Manager Managing Director AXA Rosenberg Quantia Capital Senior Equity Trader Sales for the Americas Accipiter Capital Head Trader Morgan Stanley Ohio Public Employees Penserra Securities Management Northern Trust Barclays Capital Management ICM Asset Management Investment Management Retirement System

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editor’s letter

Volume 6, No. 2 VP/GROUP PUBLISHER John Ecke 212.600.3097 [email protected] EDITORIAL Editor-in-Chief Kerry Massaro [email protected] Group Content Manager Les Kovach [email protected] Editor-at-Large Ivy Schmerken [email protected] Executive Editor Cristina McEachern Gibbs [email protected] New Year,New Projects, Associate Managing Editor Nathan Conz [email protected] Contributing Editor Larry Tabb [email protected] ART Amelia Fabian, Igor Jovicic, Jim Lawyer, Kristen Terrana New Leadership BigYellowTaxi.com

ADVERTISING SALES OFFICE ith the first quarter of 2010 behind us, it’s finally 11 WEST 19TH ST., 3RD FLOOR starting to feel like a new year — one that is off to NEW YORK, NY 10011 Director of Sales Felissa Kaplan 212.600.3171 [email protected] a very promising start. Buy-side shops are putting Midwest/International Brian Keenan 516.562.5145 [email protected] the crisis behind them and starting to plan sub- Northeast Robyn Forma 212.600.3118 [email protected] stantial trading and technology projects. They are PRODUCTION Advertising Coordinator Amanda Waller [email protected] looking at 2010 with new eyes and are making big Production Manager John Polihronakis [email protected] changes (see this month’s cover story, “Hard at Work,” page 22). AUDIENCE DEVELOPMENT W Assistant Manager Adrienne Farquharson [email protected] That said, I am preparing to do the same. After 11 fantastic years For article reprints and e-prints, please contact: with UBM and TechWeb, I have decided to move on in order to focus my Wright’s Reprints attention on two very important personal “projects” — my four-year-old Brian Kolb 877.652.5295 [email protected] daughter and five-year-old son. List Rental As one of my sources noted back in 2006, soon after Advanced Trading MeritDirect Anthony Carraturo 914.368.1083 launched, “Now you have three infants to take care of.” It was true. They [email protected] each have required lots of nurturing and left me with little sleep. But now INFORMATIONWEEK FINANCIAL SERVICES that Advanced Trading is a proven brand, has a loyal following and is a suc- UBM TechWeb CEO Tony L.Uphoff [email protected] cessful business, I can step away from this particular five-year-old and pass VP and Group Publisher John Ecke [email protected] Editorial Director Greg MacSweeney [email protected] the torch to new leadership. Group Content Manager Les Kovach [email protected] Cristina McEachern Gibbs, Advanced Trading’s VP,Group Sales Martha Schwartz [email protected] Director of Sales Felissa Kaplan [email protected] current executive editor, will be the brand’s new top Webmaster Vitali Zhulkovsky [email protected] editor. Cristina began her journalism career in 1999 Event Director Jennifer Iannucci [email protected] Event Manager Mitzi Trafton [email protected] working for me as a writer for AT’s sibling brand, Director of Marketing Sherbrooke Balser [email protected] Director, Program Management,Vertical Markets Michelle Somers Wall Street & Technology. In 2007, after Advanced [email protected] Trading had a year under its belt, I tapped her talents Associate Business Manager Joe Donnelly [email protected] again, this time to serve as an experienced voice on UBM TECHWEB the fledgling brand. She was excited about the new CEO Tony L.Uphoff venture and embraced the challenge and has been Chief Content Officer and Editor-in-Chief,TechWeb.com David Berlind Chief Information Officer David Michael my right-hand woman ever since — writing in-depth Chief Financial Officer John Dennehy features, crafting directories and photo galleries, helping with Summit SVP and Content Director Bob Evans SVP,Light Reading Communications Group Joseph Braue planning, and most important, providing crucial input on all facets of the SVP,InformationWeek Business Technology Network John Siefert VP,Editorial Director, InformationWeek brand. Her 10 years covering the capital markets, her dedication to the Business Technology Network Fritz Nelson brand, and her editorial integrity and excellence make her the perfect VP,Audience Marketing Scott Vaughan VP/Group Publisher,Vertical Industries John Ecke choice as Advanced Trading’s new leader. And knowing my other “baby” VP,Group Sales, InformationWeek is in good hands makes my decision to leave a little easier. Business Technology Network Martha Schwartz VP,InformationWeek Analytics Art Wittman I’ve had an amazing run covering the industry and working with so many VP,People and Culture Beth Rivera of you on a regular basis. Thank you for the insight, feedback and trust that UNITED BUSINESS MEDIA LLC SVP,Strategic Development and Business Administration Pat Nohilly you have shared with me and that has helped shape Advanced Trading. SVP,Manufacturing Marie Myers Your loyal readership has made the brand a huge success. But AT still is in its infancy, and no doubt it will rise to new heights under Cristina’s leadership. Here’s to wishing Cristina and Advanced Trading continued success!

Kerry Massaro, Editor-in-Chief

8 April 2010 • www.advancedtrading.com • ADVANCED TRADING Advanced Trad 7.75 x 10.5 AES Crossfinder_8.5 x 11 3/4/10 9:45 AM Page 1

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market intelligence

Buy-Side Algo Use, Block Trading on the Rise

n the wake of the financial crisis, the needs of the buy that 31 percent of their share volume was sent to bro- side have changed, according to a recent TABB Group ker algos in 2009, up from 24 percent in 2008 and 22 benchmark study. Buy-side firms’ No. 1 goal now is to percent in 2007. For 2010 firms said they expect that to rise to 36 percent, but Berke asserted that firms his- rebuild assets and performance records, the study says. torically have underestimated how much they will In a presentation of the study for the media, author use algorithms, so that number could go even higher. Laurie Berke, principal at TABB Group, said that And while there has been talk of streamlining the when asked what will drive their growth in 2010, buy- algorithm tool box, the number of algorithm side firms reported relative performance as the top providers with which the buy side deals actually increased in 2009 over 2008. Berke said that on aver- driver, followed by absolute performance, return of age in 2008 firms relied on six brokers for algorithms; retail investor confidence, stock selection, new and alternative products, that increased to 10 brokers in 2009. “There was a lot and return of asset allocation. “Obviously the buy side has gone through of moving around on the Street and talented techni- Ia tremendous loss of assets, and no other priority is more important than cal people who moved, and firms were interested to reestablishing that performance track record,” she reported. see what they were doing,” she explained. Berke added that this shift in focus will change the buy side’s relation- “As the markets have settled down, firms have ship with the sell side. She pointed out that with assets down in 2010, the had more time to take a look at new strategies,” ability of the buy side to pay the sell side for services “has been severely Berke continued. “The expectation is, now that mar- damaged at a majority of buy-side firms.” kets have settled down, brokers have come up with Two-thirds of the firms surveyed by TABB Group reported that their additional innovations, and the buy side has more commission wallets decreased from 2008 to 2009, Berke said. She noted that time to take those in and consider them.” the increasingly widespread adoption of commission sharing arrangements, But while the buy side is using more algo or CSAs, and the formalizing of unbundling will compound the impact of providers, the number of core brokers it used on smaller commission wallets. According to the study, 65 percent of buy-side average declined 11 percent over the past two years, firms used CSAs in 2009, up from 58 percent in 2008 and 40 percent in 2007. from 15.5 core brokers in 2007 down to 12 in 2009. Algorithm use by the buy side also continues to rise, with firms reporting Block Party Meanwhile, according to the TABB study, buy-side Percentage of Buy-Side Share Volume firms anticipate conducting more block trading Sent to Broker Algorithms (2005-2009) going forward. “During the period of extreme market conditions, folks were reluctant to step up and Compound Annual 36% print a significant piece of stock,” said Berke, who Growth Rate,‘05-’09=+27% 31% added that many buy-side firms want to see more counterparties trade larger blocks. 24% More and more, these block trades will be execut- 21% 22% ed electronically rather than through a sales trader. The report found that the percent of blocks traded electronically has increased from 45 percent in 2008 11% to 59 percent in 2009, and that is expected to climb to 64 percent in 2010. The TABB Group study, “U.S. Institutional Equity Brokerage 2010: Assets, Commission Management 2005 2006 2007 2008 2009 2010* and Concentration,” is based on interviews with 66 Source: TABB Group *Estimated head traders at U.S. institutional equity management firms. ■ —Cristina McEachern Gibbs

10 April 2010 • www.advancedtrading.com • ADVANCED TRADING 0410_11.qxd 3/2/10 2:59 PM Page 11

SunGard Launches U.K. Broker To Fuel European Expansion

unGard launched a U.K.-based electronic and independent offering to execute these trades in agency broker-dealer to serve the spon- driving down their overall cost of business,” Mishoe sored-access and high-frequency trading says. “We allow [brokers] to get direct access to their markets in Europe. The new firm, SunGard MTFs and exchanges, access to value-added technol- SGlobal Execution Services, which opened this past ogy — algorithms, smart order routing — as well as fall, is working to gain trading access to all of the pri- complete transparency into the trading model.” mary European markets and multilateral trading According to Mishoe, SunGard Global Execution facilities (MTFs). “The strategy is clearly defined Services intends to become a member of all of the when you look at the individual market segments primary European markets and MTFs. Currently, we are targeting,” says Dave Mishoe, a London- the firm is a member of the LSE as well as the U.K.- “You’re see- based managing director with SunGard Trading. based MTFs, including Chi-X, BATS, Turquoise The impetus for launching SunGard Global (which recently was taken over by the LSE) and ing a lot of Execution Services came from SunGard’s U.S. Nasdaq OMX Europe. It’s also an active member of the regional clients, which are struggling with the ability to NYSE Euronext, including the Paris, Amsterdam [brokers] expand into international markets and to understand and Brussels exchanges. In addition, SunGard was giving up the complexity and clearing costs, according to expecting final approval in February on a pending their execu- Mishoe. SunGard also sees an opportunity to serve application for the Deutsche Borse Xetra platform tions to the regional broker-dealers in Europe that are not com- and has started the application process at the Swiss, fortable giving up their order flow to larger Tier One Italian and Nordic exchanges. larger firms, global firms competing for the same underlying For technology, SunGard will utilize variations of go out of investors in their home markets, he notes. SunGard its existing platforms, Mishoe relates. To accommo- business or added several hundred regional European brokers to date the ultralow latency requirements of HFT firms, consolidate.” its network through the October 2008 acquisition of the company offers colocation services, typically at –Dave Mishoe, Paris-based trading technology provider GL Trade. the European exchanges themselves, he adds. Managing SunGard Global Execution Services also will help Director, clients navigate the increasing liquidity fragmentation Cost Control SunGard in Europe that is evolving following the implementa- In addition to connectivity, SunGard also is able to Trading tion of the Markets in Financial Instruments Directive offer clients cost-effective execution, Mishoe notes. (MiFID) as well as rising execution and clearing costs. He points out that because of the large volume of “The timing ... was fantastic in the wake of rapidly shares from high-frequency trading firms flowing fragmenting markets. All the MTFs and regional firms over its network, SunGard is able to participate on [want] to trade cross-border but [are] unsure of where trading venues at the highest level of discounts and to place their bets in terms of memberships and tech- pass along those savings to clients. nology infrastructure,” Mishoe explains. To help control clearing costs, SunGard selected a clearing partner in Europe that is a member of all six In Search of Best Execution of the leading European central counterparties “You’re seeing a lot of the regional [brokers] giving (CCPs). Unlike in the U.S., where “clearing is homog- up their executions to the larger firms, go out of enized through the single agency clearing model with business or consolidate,” Mishoe adds. Noting that DTCC,” Mishoe relates, “there are six clearing hous- the regional broker-dealers are concerned that their es throughout Europe, so the expense is multiplied.” larger counterparts are internalizing their order flow As for compliance controls, Mishoe notes that and in general provide little transparency into how SunGard already has the pre- and post-trade risk orders are executed, he contends that SunGard can management technology required by exchanges and help the regionals achieve best execution. regulators in Europe. “We are one of the first firms SunGard believes its neutrality as a software com- to offer sponsored access, DMA and the high-veloc- pany that doesn’t trade for its own proprietary ity DMA in Europe,” he claims. “We have a model account, operate a dark pool or run a sales desk will that provides very robust pre-trade and post-trade attract brokers’ business. “We provide a very neutral risk management.” ■ —Ivy Schmerken

ADVANCED TRADING • www.advancedtrading.com • April 2010 11 0410_12-13.qxd 3/9/10 9:44 AM Page 12

anatomy of a trading floor

Reported by Cristina McEachern Gibbs

Featuring: ConvergEx Group onvergEx’s midtown Manhattan trading floor is home to a cross- section of traders covering equities, options, fixed income and derivatives. The floor trades on an agency basis for ConvergEx customers and also supports the extensive direct-market-access technology and Ctools that the firm provides to those clients who trade on their own behalf. The floor also houses a dedicated ETF trading desk, an ADR desk and a program trading group. “We are a technology-driven company,” says ConvergEx CEO Craig Lax. “On any given day we have about Anthony Conroy (above) is managing director and head trader at 500 customers that are trading electronically ConvergEx.He continually monitors trades coming in on epass, the into all U.S. destinations and 52 markets around firm’s high-touch internal order management system, on the screen at the top right of his desk.He views scrolling global news and live feeds the world using our algorithmic trading tools, into the S&P futures pit on his bottom right screen.The two screens dark pools, crossing engines and DMA tools.” to his left house his Bloomberg information.

12 April 2010 • www.advancedtrading.com • ADVANCED TRADING Photography by Stephen Aviano 0410_12-13.qxd 3/9/10 9:44 AM Page 13

Equities Trading (left): ConvergEx’s equity trading team comprises 27 domestic equity sales traders in New York, two in Boston and two in San Francisco.“We want our clients to view us as an extension of their desks,”says Peter Coleman, the firm’s managing director of sales trading. ConvergEx also operates two internal dark pools — VortEx and Millennium — as well as the ConvergEx Cross block-crossing pool.

Thomas Symkowski (above) is managing director,co-head of portfolio trading, and head of ConvergEx’s ETF desk, which was launched in December.The 11-person ETF desk executes rebal- ancing and basket trades, as well as quantitative strategies, for clients.The two screens on the top left of Symkowski’s desk house FlexTrade applications, while the two screens at the bottom left house his Bloomberg data and charting.The bottom right screen displays APEX, ConvergEx’s proprietary portfolio algorithmic optimizer.

Options Desk (above): ConvergEx’s options traders are located to the left of the equity group and in front of the ETF and portfolio trading group.There are four options traders on the firm’s New York floor,but its main options trading operations are based out of ConvergEx’s LiquidPoint main office in Chicago. George Themelis (right) is SVP of global equity trading.He views his proprietary OMS blotter,known as Tracs, as well as his RealTick EMS on the screen to his far left.His middle screen houses the RT,or Real-Time, Monitor application, which alerts him to any global customer issues.“There are millions of messages flowing through our system, and this highlights the one message that’s the problem and filters these messages so we can deal with them,”Themelis explains.The screen to his right displays his Bloomberg information as well as e-mail and instant message windows.

advancedtrading.com To view additional photos of ConvergEx Group’s New York trading floor and learn more about the firm’s technology,visit advancedtrading.com/photos/ConvergEx.

ADVANCED TRADING • www.advancedtrading.com • April 2010 13 0410_14-15.qxd 3/9/10 9:47 AM Page 14

algorithmic trading

As the new managing director and head of equity electronic trading at Deutsche Bank, Jose Marques is heading up development of smarter algorithms to source dark liquidity. By Ivy Schmerken Go to the Head Of the Class

ose Marques joined Deutsche Bank in January as managing director and head of equity electronic trading with a global mandate to build out algorithmic trading and direct-market-access (DMA) products through a uniform offering. “I ... joined to build upon the success of the franchise and enhance the equity electronic trading plat- “We will see clients form,” says Marques, who oversees all aspects of equity electronic trading and DMA, including focusing on better, algo trading within Deutsche Bank’s Global Markets division. more intelligent JSpecifically, Marques will head three areas: product development, sales (distribution and marketing), and technology. As such, he will supervise a ways of aggregating significant number of employees globally across all three areas. Two weeks into his new job, Marques was traveling on a world tour of dark liquidity.” Deutsche Bank’s key offices for algorithmic trading and DMA product devel- —Jose Marques, Managing Director opment when Advanced Trading caught up with him. He was in Hong Kong and Head of Equity Electronic Trading, and then heading to London the following week. “We have product-specif- Deutsche Bank ic algo developers in every market that we trade,” he explains. “Developers are managed globally, but there are specialists in each and every market.” “That is clearly topical with the SEC at the Marques joined Deutsche Bank from Credit Suisse, where he was a moment,” he adds, referring to recent proposals from managing director in the alternative execution products group. He brings the SEC to increase transparency into dark pools. 15 years of experience in the capital markets with him, including senior Marques says he is keeping an eye on regulatory electronic trading positions at Morgan Stanley and Goldman Sachs. developments. “The SEC is going to help us define In explaining what attracted him to Deutsche Bank, Marques cites the the ultimate market structure and what dark liquid- bank’s diversified client base, which includes institutional investors and ity is. It’s our job to deliver that liquidity to clients in hedge funds. “It’s underappreciated that Deutsche Bank has a huge foot- a way that solves our trading problems,” he notes. print and can facilitate low-latency trading in 60 market centers, with While new regulations are likely to affect the way Asian markets being a major differentiator,” he says. “[Deutsche Bank] has that algorithms interact with dark liquidity, Marques a market-leading prime brokerage product and some of the best quantita- says, new rules are needed to ensure fair access to tive and trading minds on the Street,” he adds. information. “Dark liquidity is important for institutional clients because it facilitates their trading, but the Developing Smarter Algos SEC is trying to make sure we don’t end up with a two- While Marques declines to discuss specific algorithms in the product tiered market,” he comments. “Overall, we think what pipeline, he indicates that algorithms under development will focus on is being proposed is constructive, and within that smarter ways to source dark liquidity. “This year will be a lot like last year framework, we think our algos are well positioned to in that certain issues haven’t really been resolved in the marketplace. We deliver that liquidity in an intelligent way that mini- will see clients focusing on better, more intelligent ways of aggregating dark mizes market impact and information leakage.” liquidity in various forms,” Marques says. Marques, who earned a Ph.D. in physics from the

14 April 2010 • www.advancedtrading.com • ADVANCED TRADING 0410_14-15.qxd 3/9/10 9:47 AM Page 15

The Age of the Algorithm For more on the evolution of black-box trading strategies, download Advanced Trading’s exclusive digital issue examining the rise of the algorithm. advancedtrading.com/digital-edition/feb2010 University of California, will bring a quantitative perspective to the problem. “Part of what we do is to quantify the trade-off between executions and Another trend that’s hard to ignore is high-fre- execution quality in both bright and dark markets,” quency trading. While there is a lot of negative noise he says. “We can show the clients what the benefits about high-frequency traders in the market, they are and segment it even finer based on the kind of are serving as liquidity providers, assuming the role counterparty on the other side of a dark trade.” historically filled by specialists, Marques asserts. According to Marques, Deutsche Bank will work He points out that Deutsche Bank provides tools to develop smarter strategies in every class of algo. that allow the liquidity takers — institutional “Whether it will be VWAP or arrival price, dark liq- investors — to compete on equal footing with the uidity is a key component of algorithmic develop- liquidity providers — the high-frequency traders. ment,” he relates. “We have low-latency platforms and smart algo- In addition to monitoring events in the dark pools rithms that enable clients to be competitive,” says space, Marques says, he also is closely watching devel- Marques. “We offer clients the opportunity to trade opments in sponsored access. “We’re generally sup- on par with those liquidity providers. We have the portive of the proposals that are out there related to same data feeds, the same low-latency platforms, having the broker-dealers take responsibility for their the same [colocation] facilities as the best of those clients’ actions,” he reports. “It won’t change the way guys, and we incorporate all those tools in our algo- algorithms work, but it will impact the DMA space.” rithms to level the playing field.” ■ ConvergEx Group Launches Tactical Trading Algo

onvergEx Group has launched Abraxas, a claims that Abraxas’ “tilt” toward agency pools, tactical trading algorithm that utilizes a however, means that the algorithm is “sitting at the proprietary, multidimensional sensitivity right tables.” Further, Daspin says, the dynamic mar- profile to exploit dark liquidity, favorable ket sensitivities employed in the strategy tell the Cprice movements and volatility changes. “As algorithm how aggressive it should be. opposed to schedule-based algorithms, tactical According to Daspin, in order to determine how, trading algos are designed to intelligently navigate when and where to trade, the sensitivity profile looks difficult markets and trade less-liquid symbols,” at five key market signals: price — as price becomes explains Scott Daspin, managing director in global more favorable, the algorithm will execute more of “Abraxas auto- electronic sales at ConvergEx. “To do this, Abraxas an order; timing risk — as volatility increases, it will trades opportunistically as liquidity becomes avail- become progressively more aggressive; spread — mates how able at favorable prices, leverages both displayed the wider the spread, the more passively it will par- that trader and non-displayed markets, and adjusts its level of ticipate; tick — as the stock price is printing, it will would instinc- aggression based on many market factors using the become more passive or aggressive as needed; and tually balance multidimensional sensitivity profile.” momentum — if there is a strong trend in the stock the impor- To explain how the multidimensional sensitivity pro- price, the algo will become more aggressive. tance of a file works, Daspin uses a poker analogy: “For Abraxas “Someone who’s been a trader for years knows to trade well, it has to be playing brilliant poker in 20 how, when and especially where to place an order,” stock’s price, different ATSs and exchanges at once,” he says. “And explains Daspin. “Abraxas automates how that trad- volatility, in these venues, every move a trading system makes — er would instinctually balance the importance of a spread,tick and every IOI, IOC or posting — has an effect.” stock’s price, volatility, spread, tick and momentum momentum.” Daspin adds that every trading move becomes a at any give point in the order’s life cycle.” “tell” to the market, and often the first generation of The Abraxas algorithm also relies on a built-in pro- —Scott Daspin, Managing Director, tactical trading algorithms act like “middling poker prietary darkness rating that ranks non-displayed liq- ConvergEx players who will sit down at any table, bet big when uidity venues and favors exposure to the most benign they have their first good hand and play far too — often agency — liquidity before routing to other timidly when it’s time to press their advantage.” He venues, Daspin notes. ■ —Cristina McEachern Gibbs

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electronicmarketplaces Exposing DARK POOLS Will an SEC proposal to identify dark pools in real-time trade reports do more harm than good? By Ivy Schmerken

ollowing the financial crisis, the Securities and Exchange Commission has redoubled efforts to shine a light on opaque practices that deny investors fair access to information and potentially could damage the integrity of the national market system. But industry participants are concerned that a recent proposal actually will make matters worse. An SEC proposal for increasing transparency into dark liquidity pools has sparked debate in the industry over whether disclosure of trades on a real-time basis could play into the strategies of gamers and high-frequency traders. In October 2009 the SEC issued a concept release detailing rules that would require real-time While no rules have been finalized, SEC propos- disclosure of the identity of dark pools and other als for the regulation of dark pools — termed “non- Falternative trading systems (ATSs) on the reports of public trading interest” — were made available for their respective executed trades. The proposal public comment until Feb. 22, 2010. The commission would mandate that dark pools and ATSs attain now could impose new requirements to promote specific market participant identifiers (MPIDs). visibility into the private equity trading networks. Currently, dark pools, which are members of the “The large institutional firms can see an awful lot Financial Industry Regulatory Authority (FINRA), of risk if there is real-time disclosure,” comments report their trades to a trade reporting facility, or Bernard Donefer, distinguished lecturer, associate TRF, operated by either NYSE Euronext or Nasdaq, director, Subotnick Financial Services Center at or to FINRA’s Alternative Display Facility (ADF). Baruch College in New York. “One of the things But these trades are identified as over-the-counter that institutions are afraid of is that, if dark pools trades, so the identity of the dark pool that execut- are forced to report in real time, people can look at ed each trade is not publicly disclosed. those little footprints on the ticker and say, ‘There

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is somebody doing big trades in this stock,’ and an agency broker that develops algorithmic trading use that to game the system,” he explains. “These strategies and operates the ITG Posit dark pool, are quant strategies looking at trading patterns for expressed concern that including the identity of an anomalies to take advantage of market impact, and ATS on trade reports on a real-time basis may allow not necessarily evil people.” traders to take advantage of large orders being executed on an ATS. “ITG supports disclosing the iden- A Catch-22 tity of the ATS on the reports of executed trades. The SEC’s proposal represents something of a However, we believe that such disclosure should Catch-22. While traditional asset managers would be done on a delayed basis, such as the end of the like more data on which stocks are trading in dark trading day,” the company stated. pools, they are reluctant to leave a trail of bread “We’re against the real-time stock-by-stock disclo- crumbs for high-frequency traders to pick up. sure. We feel that it is too much information that can “There’s too much leakage, and it doesn’t benefit be taken advantage of by gamers,” comments Dmitri anyone other than high-frequency trading shops,” Galinov, director of Credit Suisse Advanced comments Andrew Weinberg, global equity trader at Execution Services (AES), which operates PineBridge Investments in Dallas. CrossFinder ATS, the largest U.S. equity dark pool, If the high-frequency trading shops see that a particular stock traded in a dark pool, Weinberg warns, the information could be used against the buy side. “There’s too much “It’s probably giving too much data for them to know which dark pools to go into, and for the lack leakage, and it of a better word, to ‘game’ the liquidity,” he suggests, noting that since HFT firms are using the doesn’t benefit fastest technology, they can get to the venues first anyone other than and take advantage of the information. “Whereas long-only asset managers and mutual funds are high-frequency looking for the best source of liquidity and for min- trading shops.” imal impact, if you start announcing which dark pools have liquidity, there’s an opportunity for fast – Andrew Weinberg, Global Equity Trader, money to game against them.” PineBridge Investments The SEC realizes, however, that disclosing the identity of ATSs could cause information leakage that would be damaging to institutions executing large block trades. Hence, the agency’s proposal would protect the identity of an ATS executing a large trade with a market value of at least $200,000. according to Rosenblatt Securities reports. But while the SEC is prepared to make an excep- “Basically, disclosing real-time stock-by-stock tion for block trades, Weinberg argues that the iden- trades is going to bring more harm than good,” tification of ATSs that execute smaller trades is argues Galinov, noting that this especially would be even more of a concern. “The danger is more in the the case with small cap stocks. If CrossFinder is smaller pieces — that’s where you are going to see printing trades for a particular small cap stock, he the high-frequency [traders],” he asserts. Instead explains, “The gamers will know the dark pool has of looking at the 30,000- to 40,000-share trades, HFT a significant representation [for that stock] from firms, which rapidly buy and sell shares to capture institutional customers.” arbitrage opportunities, are more interested in the 300-share prints, Weinberg suggests. Closing the Information Gap Since the HFT strategies monitor how stocks Some buy-side traders, however, are not comfortable “are reacting and behaving, imagine giving them with the current lack of information about where more information about where the liquidity is,” trading in dark pools takes place. “It’s still a mystery,” Weinberg continues. “That’s going to make it even says Jeff Albright, head trader at Waddell & Reed easier for them to hit one destination as opposed to Asset Management in Shawnee Mission, Kan. “Quite hitting all the others.” frankly, I believe if we’re representing an institution Brokers that operate dark pools also are con- as an active participant, we should be able to see cerned that disclosing trades in real time with a where the volume is trading after the fact, just as a unique identifier could provide gamers with an edge. regular trade is reported outside of the dark.” In a letter commenting on the SEC’s proposals, ITG, While Albright says he’s not sure if the dark pool

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electronicmarketplaces

light on their operations. While the SEC’s recent “Disclosing real-time proposal said dark pools collectively accounted for 7.2 percent of average daily volume at the end stock-by-stock of the second quarter of 2009, Rosenblatt Securities reported that the share of consolidated U.S. equi- trades is going to ty volume on the dark pools that it tracks jumped bring more harm from 7.82 percent in June 2009 to 10.15 percent in December 2009. than good.” As the number of active dark pools has grown –Dmitri Galinov, Director, from 10 in 2002 to 29 in 2009, the dearth of informa- Credit Suisse Advanced tion on their trading activity has become a growing Execution Services concern for many industry participants. “Today there is no ‘gold source,’ ” says Nasdaq OMX’s Hyndman. “And a lot of firms want to report — they want to boast that they have dark pool volume.”

Reporting Alternatives trades need to be reported to the tape in real time, he Few, if any, dark pool operators, however, want to doesn’t see why a dark pool shouldn’t be forced to report in real time, as the SEC has proposed. play by the same rules as the lit markets. Currently, According to Credit Suisse’s Galinov, for example, all dark pools must report their trades within 90 sec- the firm prefers proposals from the New York Stock onds to the TRF operated by either NYSE Euronext Exchange and Nasdaq to report dark pools’ aggre- or by Nasdaq or to FINRA’s ADF. Market centers gated volumes at the end of the day on their TRFs (i.e., exchanges) are required to report their trade and on their individual Web sites. activity within 90 seconds to the Consolidated Trade To provide transparency into dark pool volumes, System (CTS), but unlike dark pools, regulated in late October 2009 NYSE Euronext revealed a exchanges are required to publish the name of the plan to publish dark pool trades through the venue on which the trade took place. FINRA/NYSE TRF. In teaming with five of the Dark pool and ATS executions, however, are largest operators of dark pools — Barclays Capital, reported as OTC trades in the consolidated tape. Getco, Goldman Sachs Group, Knight Capital Group “When you look at a TRF or the ADF, it just indicates and UBS AG, which together accounted for 4.5 per- the trade was done OTC,” explains Baruch’s cent of the volume at that time — NYSE Euronext Donefer. “You don’t know if that was an upstairs planned to provide an end-of-day breakdown of vol- trade done at Goldman Sachs or at a dark pool. You ume segmented by executing venue/dark pool, don’t know if that was done by a market maker or notes Ray Pellecchia, managing director and NYSE OTC at an exchange.” spokesman. “The idea was to show the market In its concept release, the SEC contended that the essentially where all the trades printed on our trade current level of post-trade transparency for ATSs is reporting facility took place,” he explains. inadequate. Though these trades are reported to Nasdaq came out the following day with a simi- the tape using the broker’s MPID, it’s not clear lar plan, but both efforts currently are held up while whether the trades were executed in the bro- a FINRA filing awaits SEC approval. Both ker’s dark pool or via its market maker desk. exchanges said they would post the dark pool vol- As a result, the dark pool volumes are umes on their Web sites, so the information would lumped in with the broker-dealer’s inter- be free to the public. nalized volumes, say industry sources. “The dark pools don’t necessarily want to report The SEC points out in its proposal in real time,” says Nasdaq OMX’s Hyndman, who that it wants to close the information adds that Nasdaq would be content with some type gap between dark pools/ATSs and of end-of-day reporting. According to the FINRA fil- exchanges. “The commission would like ing with the SEC, under Nasdaq’s reporting plan, to see ATSs identify who they are and do dark pools would voluntarily opt-in, agreeing to some type of post-trade reporting,” says identify their trades. “It’s likely to be more of an Brian Hyndman, SVP of transaction aggregated number, though it may evolve into some- services at Nasdaq OMX. thing that’s more granular,” Hyndman predicts. The regulator has cited the growing But Credit Suisse feels that even end-of-day share of liquidity in NMS stocks claimed by reporting is not appropriate for highly illiquid dark pools as a driver behind its efforts to shed stocks in which it takes an institution three or four

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days to acquire a position. furnished on a disaggregated basis — i.e., trade by “We feel that [for] small cap trade — and with no exemption for block execu- stocks, even end-of-day disclo- tions in order to provide the marketplace with the sure would be too much informa- maximum amount of information,” the company tion leakage,” explains the firm’s stated. “ITG would also recommend that this post- Galinov, who says he favors end-of- trade reporting requirement be extended to all par- week reporting for small cap stocks. ticipants who affect executions, not just ATSs.” In addition to concerns regarding the timing of trade reports, some industry participants believe For Regulators’Eyes Only the reporting should be anonymous. Baruch’s While the SEC is expected to rule on dark pool trade Donefer suggests that rather than report ATS trades reporting sometime this spring, Baruch’s Donefer as simply “OTC,” perhaps it would be better to indi- raises an interesting possibility: real-time reporting cate on the ticker that the trade occurred in a dark to regulators but delayed reporting to the market. pool. He acknowledges, however, that there is a “The data should be collected for any trade in every need for greater transparency. stock and should be available to the regulators in “There is some value to publicly disclosing where the trading is taking place,” Donefer says, noting that it would help institutions fine-tune their “If we’re representing smart routers in terms of where to look for liquidity. “The downside,” he cautions, “is that, if people an institution as an see dark pools are trading more shares, they may active participant, send more order flow there and end up further amplifying the amount of trading going away from we should be able other ATSs and exchanges.” Worried about information leakage, PineBridge’s to see where the Weinberg supports the view that trade reports should volume is trading be anonymous, but he agrees that they should reveal that the venue is a dark pool without disclosing the after the fact.” identity of the specific venue. “It doesn’t matter – Jeff Albright, Head Trader, which dark pool it is per se, but more that it’s trad- Waddell & Reed ing in the dark,” says Weinberg. He points out that Asset Management most asset managers are currently using dark pool aggregators to get exposure to dark liquidity, and as such, they don’t need to see if a stock is active in a real time but not disclosed publicly until the end of particular dark pool because the smart order the day,” he contends. router/aggregator will find it. Credit Suisse’s Galinov says his firm doesn’t mind Still, other market participants are pushing for disclosing the information to the regulator in real full transparency into dark pools. Waddell & Reed time. “We’re not worried about displaying the infor- Asset Management’s Albright wants to see trades mation to the regulators in real time so they can executed in dark pools reported in the consolidat- run their tests,” he relates. “What people have prob- ed tape alongside trades executed on lit venues. lems with is publishing real-time stock information “My purpose in using a dark pool is to access the liq- to the overall market. The gamers can be low-fre- uidity of the dark pool,” he says. “Once your trade quency or high-frequency — it’s just the intent.” is done, why not display your trade on the tape?” Baruch’s Donefer notes that while the SEC pro- There also are different opinions on the Street as posal is intended to increase transparency into dark to whether dark pools should break down their pools, it’s also intended to standardize dark pool volume stock by stock or report the total shares reporting practices. In addition to the TRFs, most of traded as aggregated volumes. The SEC specifi- the major dark pools and ATSs report their trades to cally has asked industry participants to comment TABB Group, the financial market advisory firm, on this point. and to Rosenblatt Securities, the institutional agency In a comment letter released Feb. 23, ITG rejects broker. These firms adjust the data for double count- the view that the ATS should report all of the execu- ing and analyze the dark pools’ market share. tion reports for a particular stock on an aggregated But Nasdaq’s Hyndman suggests that more-formal basis (i.e., one figure showing the total volume of reporting would benefit the market. “If the data shares executed in a particular stock on that ATS). came from the exchange TRF,” he says, “everybody “We strongly assert that this disclosure should be would know that’s the gold source.” ■

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cover story

Buy-side firms aren’t waiting for the next big thing to lift the industry. They’re HARD undertaking large-scale projects to improve the trading desk and emerge from these trying times more efficient than ever. at By Cristina McEachern Gibbs ORK s the capital markets refocus in the aftermath of the financial crisis, buy-side firms aren’t waiting to see how things shake out. Instead, asset managers and hedge funds are undertaking major technology projects to keep their edge in the new trading world. Even while firms continue to keep a watchful eye on regulatory changes and work to keep up with Washington, many are taking this post-crisis opportunity to build something new and different. But we’re not talking about simply a new set of algorithms or a new smart order router; firms are undertaking large-scale projects to dramatically improve trading on the desk. to automate the trade order workflow on its trading Advanced Trading caught up with three firms to desk, leveraging portfolio manager profiling and a find out what they learned from the financial crisis, strategy server that decides how, when and where to Ahow they are moving forward, and what their big trade orders. And Northern Trust, which consolidat- focus on the trading desk is for this year and beyond. ed its trading operations for a more unified trading York Capital Management is in the process of desk just in time to weather the financial storm, now rolling out a new enterprise portfolio management is adjusting its broker-dealer relationships and risk system that will leverage a multi-asset-class security management focus to support continuing growth. master file and provide comprehensive risk manage- Read on to find out how these firms are trans- ment and compliance. J.P. Morgan Asset forming the trading desk and building out a brighter Management is pursuing a multimillion-dollar project future. >>

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Gary Maier,Chief Technology Officer, York Capital Management Assets Under Management: More than $12 billion. Time in Current Position: 2.5 years. York Capital Technology Used to Trade: Eze Castle OMS.All trade information is entered into the order management system and pushed downstream.But,Maier says,on the back end,the Management team enriches all the data separately.The OMS also feeds Y-FI, the firm’s new proprietary portfolio management system. Size,Structure of Trading Desk:There are five to six traders Builds a Better on the desk for pure execution.The technology team consists of three people,one of whom is dedicated to infrastructure and system administration.Regular consulting resources in Mousetrap New York,London and Hong Kong also provide help desk and local administrative support,and another consultant focuses s chief technology officer at a global, multi-strate- on documentation.Maier expects to add another three to four gy hedge fund manager with more than $12 billion people to the technology group in the coming months. in assets under management, Gary Maier has a lot on his plate in simply keeping in-tune with the day- to-day operations of his trading desk. But for a management, including a multi-asset-class security master and Agood deal of the two and a half years that he has been with York a robust account master. It also includes a real-time transaction Capital Management, Maier has been working on a major proj- blotter, real-time positions, risk and matrix pricing facilities, ect that is about to come to fruition. cash management services, a real-time compliance engine, and Dubbed Y-FI, or York For Information, Maier’s big effort is a reporting. “We are putting most of our effort into the mid- and new internal enterprise portfolio management system. The sys- back-office capabilities and improving workflow and the qual- tem, which currently is running in a beta test, leverages a ity of data across different asset classes,” Maier says. dynamic service-oriented architecture and a Web-friendly, rich Internet application (RIA) front end to deliver a broad set of Necessity Is the Mother of Invention functionalities across the firm, he explains. “When you’re a large, global multi-asset-class/multi-strategy Y-FI, according to Maier, provides enterprise reference data manager as we are, you’re trading in almost every asset class

Photography by Joshua Dalsimer ADVANCED TRADING • www.advancedtrading.com • April 2010 23 0410_22-26.qxd 3/8/10 4:08 PM Page 24

cover story J.P.Morgan and denomination out there — from equities and fixed income Asset to bank debt — which can be particularly challenging given the various permutations and current lack of available, standardized data for all but the largest of syndicate deals,” Maier says. Management When trading across so many markets and asset classes, it is hard to find one system to address every need, he adds. “Certainly on the OMS side, it’s very difficult, as most of them Gives Traders remain very equity-centric.” York’s Y-FI platform, Maier says, integrates vendor systems — along with its own internal functional and data capabilities A Break — into a consolidated environment that provides various views and access mechanisms for users across the firm. “This services the firm from front office to mid and back office, marketing, investor relations, and compliance — and everyone wants to see the data in different slices,” he notes. “First of all, we want to own our data and process, rather than be held captive to or limited by a single vendor’s current capabilities or platform. We also want to ensure a best-of-breed mix of functionality,” Maier continues. “And within the vendor community there simply aren’t a lot of platforms for hedge funds, if any, that bring everything together, especially when dealing with such a diverse product mix that is further intended to service such a broad constituency of users. We therefore felt this was a strategic effort that was well justified.” Maier points out that although the team has built some of the core application functionality, the firm does look to supplement internal efforts with outside vendor offerings, particularly in the commodities area. He adds that work on the project has been ongoing for about a year and a half, with as much as a third of that time spent scrubbing the data. “York has been in business for 19 years, so there was a lot of legacy data to scrub down, figure out what’s missing and get into a form that is consumable for a true enterprise, multi- Ben Sylvester,Head of U.S.Equity Trading, product security master and portfolio management platform,” J.P.Morgan Asset Management Maier acknowledges. “Moreover, enhancing workflow and Assets Under Management: $80 billion for the U.S. establishing new firmwide processes to ensure the ongoing equity desk,$300-plus billion globally in equities and integrity of the data is just as important as the technology plat- $1.3 trillion across the entire J.P.Morgan Asset form, if not more so.” Management organization. The firm’s operations team already is fully onboard with the Time in Current Position: 1.5 years. new system, according to Maier. Other front- and middle-office Technology Used to Trade: J.P.Morgan Asset personnel are pending. Management relies on the Longview OMS.For execu- Beyond getting Y-FI fully implemented, what’s next for Maier tion,active single-stock traders utilize Bloomberg EMSX and York Capital Management? “It’s an evolutionary cycle, and and portfolio traders rely on the ITG Triton EMS. there will always be demands for new features, new function- Size,Structure of Trading Desk:The U.S.equity desk ality and new asset classes,” he says. “As primarily an event- includes 10 traders structured around market capitalization driven shop, we have some ideas about processing tagged news — specifically,a large cap group,a small and mid cap feeds to drive real-time sentiment indicators across our posi- group,and a quantitative trading group.Sylvester oversees tions, for example.” equity trading for the Americas,which includes Latin In the meantime, Maier says, continuing to build out Y-FI America and Canada.“It had previously been a sector- and a project to introduce a new accounting engine will keep based trading desk,but we wanted to turn back in and face him quite busy. “Further, I expect regulation is going to be a big portfolio managers and products in a more efficient way,” area of focus for the industry,” he comments. “What impact it’s he explains.“And it’s more trading-friendly instead of being going to have — from a compliance standpoint, from a pricing all over the cap scale.Fewer managers facing fewer traders standpoint and for risk mitigation, especially for securities builds better probability sets of positive outcomes.” where the market is not so liquid — that’s going to be in front of everybody over the next year or so.” ■

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en Sylvester, head of U.S. equity trading at J.P.Morgan flow,so they can improve the models when need be.” Asset Management, also is also relatively new to his As more of the order flow is handled in the automated environ- post. But like York’s Maier, he hit the ground running. ment,Sylvester stresses,traders will have more time to add value Sylvester already is undertaking a major project to to the investment process in other areas.“They’ll still be trading the build an Execution Optimizer, or EO, that will further more challenging order flow,so now they can take their heads up Bautomate the trade workflow by utilizing transaction cost analy- and look around and think about what it should look like,” he sis (TCA) and portfolio manager profiling to generate strategies notes. “I hear traders all the time say, ‘I would love to be more and ultimately execute on them. involved in the investment process,but I do too much trading.’” Sylvester says that as part of the multimillion-dollar project to automate trade order flow, he specifically is focused on building History Lesson a strategy server to automate and build sector models.“This proj- In determining the best way to execute a strategy,the EO also ana- ect is a massive investment of people,time and infrastructure,”he lyzes historical order flow — both from days before and after trades reflects.“This will air traffic control all of the order flow on the buy — to understand positions.“So it takes the origin of an order — the side and help define who gets what trades and how it gets trad- portfolio manager — and the strategy server will decide what strat- ed and where instantaneously.” egy or strategies associated with that portfolio manager will be most According to Sylvester, how firms use TCA and data analysis effective and what the time horizon should be,”Sylvester describes. should be changing with the times.As the markets,portfolios and The system might direct the order to a trader and then specify traders change,trading strategies should change as well,he adds, that the order be traded over the next three hours.It helps define and TCA and other data analysis can help improve those strategies. the participation rate or level of aggression,and may even dictate “Transaction cost analysis has always been a ‘have to have,’a nec- the venue in which the strategy should enter the market.Or the EO essary evil. But it’s a gold mine of information [for my trading may execute the order automatically based on those same param- desk],and I should really learn how to harness it,”he says. eters.“The strategy server will be a factor model based on a variety of different models based on historical transaction data that is con- Breaking Down Portfolio Managers stantly updated with real-time transactions,”Sylvester says. In addition to transaction data, the EO will leverage manager Sylvester notes that he and his team worked with Citigroup’s profiling data.“I looked at the alpha of each portfolio manager Automated Trading Desk (ATD) unit to validate the idea behind and where that intersected with the trade,” Sylvester explains. the EO initially and now is codeveloping the factor model with the “Breaking down a portfolio manager from a statistical perspective group.“ATD is an automated market maker and they profile stocks, was important to then be able to build strategies more efficient so I approached their director of research with the idea to see if for that manager.” This type of information,he asserts,is empow- my assumptions were valid and to see if they could enrich the ering for traders, as it helps them understand the short-term process,”he recalls. alpha generated by a portfolio manager and tailor trading strate- The internal strategy server is expected to be rolled out to the U.S. gies for particular managers. equity trading desk and in production by the end of the second The technology will rely on a factor model that accounts for J.P. quarter.Sylvester suggests that the system represents the growing Morgan’s 28 different portfolio managers and their inherent trading trends toward automation and the incorporation of real-time data styles.“With the interfaces we’re building, order flow would come in the decision-making process — “using real-time venue analysis down through the OMS into the strategy server, where it decides to pick your execution destination,for example,”he says. whether to give the order to a trader or trade the order automati- But regulation also will be high on Sylvester’s agenda for the cally,”Sylvester explains,noting that traders will be able to monitor foreseeable future.“The financial frontier is being defined by the the decisions made by the strategy server and can interact with the regulatory environment,” he says.“So we need to be mindful [of order flow — for example,if news breaks.“It’s considered their order regulators],because we’re all subject to whatever they decide.” ■

Northern Trust Finds Success in Unity hough Rich Vigsnes became global head of equity ly manage the trading that occurs,” he says. “The consolidated trading at Northern Trust less than two years ago, trading desk was in our best interest before the crisis, and it he already has overseen the transformation of “a helped us be very effective during the crisis as well.” couple of trading desks” into one consolidated trad- Vigsnes points out that over the year and a half that he has ing operation. “We effectively had different physical been in his current position, he’s seen some “interesting days.” Tlocations in the U.S. that we brought together, as well as bring- But, he stresses, the trading team was never in a position where ing the group together from a technological and trading stand- it didn’t know what it was trading or why. And that was a direct point,” he relates. result of the new structure. This consolidation ultimately helped the firm weather the As for the technology that powers the consolidated trading financial crisis of the past two years, Vigsnes asserts. “There desk, the entire trade flow life cycle moves through Northern

PHOTO: MARK OSTOW was no frantic trading, and that speaks to our ability to efficient- Trusts’ Charles River order management system (OMS). “An

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Rich Vigsnes,Global Head of Equity Trading,Northern Trust Assets Under Management: $627 billion. Time in Current Position: Less than 2 years. Technology Used to Trade: Charles River OMS,ITG Triton EMS. The group also relies on Trading Technologies to execute futures and on FXall for foreign exchange transactions. Size,Structure of Trading Desk: There are 14 traders on the desk — 11 located in Chicago and three in London.The primary focus of the trading desk is equities,but the team also trades futures and options on equities and indices as well as FX as it pertains to equity executions.The desk is structured around product class and expertise as opposed to sector or market cap.“The first big distinction between traders is single stock versus portfolio or program trading,and then traders have specialties — maybe someone is more knowledgeable about a product line or our passive flows versus active flows,”says Vigsnes.

OMS can be many different things to many different people,” Vigsnes notes. “We view it as starting with the compliance piece — getting the trade from the portfolio manager to the trading desk and the ability for the trading desk to then have all orders in one place.” From there, the trading desk generally leverages the ITG Triton execution management system for execution, according to Vigsnes. But trades ultimately find their way back into the OMS for allocations and updating as what we consider to be commoditized types of algorithms and downstream systems. “We made a conscious decision not to other algorithms that we think are better,” he explains. combine too much EMS functionality into the OMS,” says Vigsnes also is thinking more about the location of brokers. Vigsnes. “As much as people talk about — and I would love to “Maybe I don’t want all of them to be U.S. broker-dealers,” he see — one application doing everything, for the flows that we comments. “Maybe I want a large foreign agency shop to focus on have and the breadth of strategies that we employ, it’s just not what kind of counterparty risk we’re incurring.” As for that functionally feasible.” counterparty risk, Vigsnes says he is scrutinizing details of his In addition, Vigsnes says, he wanted a broker-neutral EMS in counterparty relationships, including clearing arrangements, com- order to execute with multiple venues, and ITG’s pure agency mission-sharing arrangements (CSAs), balance policies and more. trading fit the bill. All of the group’s direct market, dark pool and The financial crisis also has made Vigsnes more aware of algorithmic access, as well as direct lines to brokers, are housed measuring the risk side of the trading equation. “When we were in the EMS platform, he notes. looking at building out trading tools, we made sure risk controls “It’s fairly dynamic, with constant changes occurring,” and risk models and optimizations were available to us within Vigsnes says of the EMS, adding that changes to the OMS are the tools so that we didn’t have to look at risk separately, and so pervasive that the entire workflow needs to be regression that helped us substantially,” he reports. tested, which he describes as a “major event” with substantial Meanwhile, regulation emerging from the fallout of the cri- lag time. “The ability to implement changes in response to sis will define Vigsnes focus in the coming year. “Making sure changes in the marketplace is enhanced by splitting these out.” we are keeping up with what we see regulators doing, and Further, the message and trading information traffic inherent to making sure we’re able to adapt to the consequences of their an EMS would substantially impact the performance of the actions is going to be a driving force this year,” he says. OMS, according Vigsnes. Lowering latency also is a priority for the trading team. “We’re not high-frequency traders, but we still react and par- Learning From the Crisis ticipate in a marketplace that has a lot of high-frequency But while Northern Trust’s unified trading operation served it traders, which generates a lot of bids and offers and messag- well during the financial crisis, Vigsnes acknowledges that the ing traffic,” Vigsnes explains. “So we want to make sure we are turmoil of the past few years is helping guide current decisions. able to not have any latency in our ability to disseminate and In general, he says, the size of his broker list has been shrinking receive information.” Improving latency also will help the trad- over the past couple of years. “But we want to be cognizant and ing desk improve its smart order routing and its ability to have diversity around different types of brokers out there as well access liquidity effectively, he adds. ■

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April 2010 Directory of Portfolio Risk Management Providers Algorithmics/Algo Risk Service ...... 28 Northfield Information Services/ Portfolio Optimizer and Analytics ...... 31 Calypso Technology/ Calypso Trading & Risk Management Platform . . 29 Patsystems/Risk Informer ...... 32 FactSet Research Systems/FactSet ...... 29 Riskdata/Risk Management Solutions ...... 32 Sophis/Sophis Value ...... 32 FinAnalytica/Cognity ...... 29 Sophis/iSophis ...... 33 Imagine Software/Derivatives.com ...... 30 Sophis/Sophis Risque ...... 33 Interactive Data/Options Analytics ...... 30 SunGard Financial Systems/ IT Software/Easy Trade Risk Manager ...... 31 SunGard MicroHedge ERM ...... 34 Misys/Misys Summit Invest SunGard Financial Systems/SunGard APT ...... 34 and Misys Risk Vision ...... 31 UBS Investment Bank/UBS Delta ...... 34

*This is not a comprehensive list of portfolio risk management providers. Advanced Trading invited other providers to participate in the directory, but they could not submit their information by press time. Providers entered their own information, which has been edited for space. For additional information on these providers, as well as directories of Performance Measurement & Attribution, Valuation Services and Counterparty/Credit Risk Management providers, see our online directories at www.advancedtrading.com/directories.

Algorithmics Algo Risk Service Description of Service Is the product offered as a managed or hosted service or as Algo Risk Service (ARS) is a Web-based risk management and an installed solution? portfolio design service. Hosted by Algorithmics and delivered While not a classic “one size fits all”ASP,Algo Risk Service is a online, it provides access to risk management and investment managed service offering providing a hosted environment unique support tools, without the cost of maintaining a complex infra- to each client.Algo Risk is our in-house installation. structure onsite. ARS covers all asset classes, risk factors and Does your offering integrate with EMS/OMS platforms? Yes. investment strategies within a scenario-based simulation Can third-party valuation models or other services be framework based on full, accurate valuation. incorporated with your product? What risk methodologies are supported? Algo Risk Service includes the provision of market/T&C data,time- Algo Risk Service provides a comprehensive library of risk analytics, series data and stress scenarios.The service also provides full data vali- including analytical sensitivities — durations/convexities,greeks,betas, dation and the ability to incorporate client-specific data as part of the etc.;numerical sensitivities — key rates,PV01,CV01,etc.;stress testing overall service.Algo has developed interfaces to Markit,Bloomberg, — interest rates,volatilities,correlations,credit ratings,etc.;VaR — para- Reuters,Andrew Davidson and FEA,among others.Standard market metric,Monte Carlo,historical;VaR attribution;credit exposures;earn- types and hierarchies are fully supported in Algo’s data model. ings and cash flow analytics;tracking error;and attribution analysis. What report-generation capabilities are offered? What asset classes are covered? Full reporting capabilities using Algorithmics' proprietary reporting. Equities/private equity,FX, corp./government bonds, municipal Contact Information bonds, inflation-linked securities, MBS/ABS and more. Heather Smith 44-207-392-5820 How often is risk calculated? [email protected] End of day.But for the sell side, we offer a real-time risk management www.algorithmics.com solution for the front office.

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Calypso Technology Calypso Trading & Risk Management Platform Description of Service Does your offering integrate with EMS/OMS platforms? The Calypso Trading & Risk Management Platform was built from Yes,many Calypso users are integrated with their OMS/EMS platforms. the ground up to be a front-to-back-office, cross-asset system for Can third-party valuation models or other services be derivatives and treasury products. incorporated with your product? What risk methodologies are supported? Many Calypso customers use our market standard analytics, while Delta, gamma, vega and other greek analyses for managing cash others incorporate their own proprietary models.This is facilitated and derivative positions.The system offers historical or Monte Carlo by Calypso’s flexible application programming interfaces. VaR and related measures — marginal VaR, incremental VaR and What report-generation capabilities are offered? expected tail losses. Calypso reports for front-, middle- and back-office users are highly What asset classes are covered? configurable, allowing users to determine what information is Calypso covers cash and derivatives products for foreign exchange, presented and how.Scheduled tasks enable the automated interest rates, credit, equity and commodity markets. generation of reports according to business requirements. How often is risk calculated? Contact Information Risk can be calculated in real time or in accordance with Gordon Chan user-defined batch schedules. 212-905-0705 Is the product offered as a managed or hosted service or as [email protected] an installed solution? www.calypso.com It is available on both an installed basis and as a hosted service.

FactSet Research Systems FactSet Description of Service Is the product offered as a managed or hosted service or as FactSet provides a combination of risk and quantitative analytics an installed solution? tools and supports each stage of a quantitative workflow. Our FactSet’s suite of software is flexible enough to be easily installed by products offer a complete and integrated solution for researching, a single user or transformed, packaged and distributed to thousands back testing and evaluating quantitative investment strategies. of desktops.Choose to install FactSet as individual workstations or as Decompose risk at a particular point in time or investigate part of a corporate thin-client or streaming application farm. changes over time. Get a complete understanding of risk with Does your offering integrate with EMS/OMS platforms? stress testing, Monte Carlo VaR analysis, portfolio optimization Yes, we offer intraday connections to clients’OMSs. and portfolio simulation. Can third-party valuation models or other services be What risk methodologies are supported? incorporated with your product? We offer both fundamental and statistical ex-ante risk models We offer many third-party services, including risk models from with short-, mid- and long-term horizons.VaR calculation method- Northfield, Barra, APT and R-Squared, and optimizers form Northfield, ologies include Monte Carlo simulation, historical simulation and Barra and APT.Clients also can load custom risk models into FactSet. parametric. Stress testing methodologies include time-weighted What report-generation capabilities are offered? and event-weighted with options to specify your own decay rate FactSet analysis is designed to be customized.Customize report and time horizon. groupings, add or remove columns from a report, and quickly What asset classes are covered? navigate between reports and charts.Analyze risk with a single Equity,fixed income, currency and derivatives. model or switch to a multimodel analysis to understand how risk How often is risk calculated? providers differ.Download any report to Microsoft Office. FactSet lets clients monitor portfolios throughout the day by study- Contact Information ing performance, risk and composition in real time.We offer global Katherine McCabe real-time prices and clients’current portfolio holdings through an [email protected] intraday connection to their trade order management systems.View www.factset.com/risk predicted risk reflective of the day’s price changes and trading.

FinAnalytica Cognity Description of Service What asset classes are covered? Focused on fat-tailed modeling,Cognity offers both holdings-based Cognity supports a growing list of asset classes across equities,fixed and returns-based risk management and portfolio construction,includ- income,money markets,derivatives,FX,futures,options and alternatives. ing analytics for asset screening,factor/exposure modeling,down-side How often is risk calculated? risk measurement,stress testing,optimization and what-if analysis. Intraday (snapshot), end-of-day,weekly,monthly and quarterly. What risk methodologies are supported? Is the product offered as a managed or hosted service or as Cognity features a patented fat-tailed distribution framework. an installed solution? Cognity measures fat-tailed VaR and expected tail loss across multi- Both an ASP hosted basis and as an onsite installation. ple distribution types and alongside classical performance measures. (continued on next page)

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FinAnalytica (continued) Cognity Does your offering integrate with EMS/OMS platforms? What report-generation capabilities are offered? Cognity provides an integrated Web services API through which Cognity provides extensive reporting across a suite of analytic EDM, EMS/OMS and proprietary applications can be integrated. modules.Both tabular and graphical results are presented in Can third-party valuation models or other services be customizable templates that are print-ready and easily exported. incorporated with your product? Contact Information Yes.In addition to Cognity’s own models and pricing calculators, Michael Palmieri services such as third-party and proprietary data, factor models, and 212-880-2670 calculators are integrated through the Web services API. [email protected] www.finanalytica.com

Imagine Software Derivatives.com Description of Service Is the product offered as a managed or hosted service or as Imagine’s ASP-based Derivatives.com service is an integrated, real- an installed solution? time portfolio and risk management solution originally designed to Imagine’s portfolio and risk management solution is available as a serve the needs of the world’s largest institutional banks.Imagine fully vendor-managed ASP service, called Derivatives.com, or as a places institutional-grade functionality,broad cross-asset instrument traditional in-house installed solution (the Imagine Trading System). support and the ability to employ any trading strategy in the hands Does your offering integrate with EMS/OMS platforms? of sell- and buy-side businesses of all sizes. Imagine offers full integration capabilities via standardized data What risk methodologies are supported? interfaces with all of the leading front-end (EMS/OMS) platform solu- Imagine supports all of the risk analytics a professional would expect tions, as well as back-end connections to leading prime brokers and from a solution provider.A representative list would include, but is fund administrators. not limited to,VaR analyses (parametric, variance/co-variance, intra- Can third-party valuation models or other services be incorpo- day,Monte Carlo, historical and multifactor); projections; back rated with your product? testing/stress testing; "what-if" scenarios; Monte Carlo and historical At present,third-party valuation models cannot be incorporated with simulations; allocation of risk across forward periods; and more. the ASP product; it is possible with the traditional in-house installa- What asset classes are covered? tion model.Imagine offers numerous out-of-the-box data interfaces Imagine supports all of the commonly utilized asset and instrument with other third-party EMS and OMS systems.Entirely new interfaces classes, including equities, fixed income, FX, credit, commodities, can be quickly created and implemented for novel applications. vanilla derivatives, swaps, exotics and more.ABS and MBS instru- What report-generation capabilities are offered? ments are not directly supported. Imagine can generate intraday risk reports on demand at any time, How often is risk calculated? or according to a user-defined schedule. Where users have opted to receive live data in Imagine, up-to-date Contact Information market data is used to revalue all positions and update risk analytics. Yvonne Dahl Hedging analyses are computed in real time, and dynamic hedges 212-317-7690 can therefore be implemented throughout the day. [email protected] www.derivatives.com

Interactive Data Options Analytics Description of Service Is the product offered as a managed or hosted service or as Options Analytics is a real-time data service that delivers advanced an installed solution? options analytics for U.S.listed equity and index options.The service Offered as both a deployed and hosted service. delivers real-time option greeks and implied volatilities. Does your offering integrate with EMS/OMS platforms? Yes. What risk methodologies are supported? Can third-party valuation models or other services be Measures risk using real-time option greeks, including delta, gamma, incorporated with your product? No. vega, rho and theta. What report-generation capabilities are offered? NA What asset classes are covered? U.S.options on equities and indices. Contact Information How often is risk calculated? Charu Krishnan Options Analytics is designed to calculate real-time, low-latency 914-313-4348 options analytics on the U.S.OPRA universe. [email protected] www.interactivedata.com

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IT Software Easy Trade Risk Manager Description of Service Is the product offered as a managed or hosted service or as Easy Trade Risk Manager is a multi-currency,multi-market, multi- an installed solution? asset real-time limit system with position keeping and risk manage- The product can be offered as an installed solution and colocated ment functionalities.It is used in pre-trade validation of order flows with the EMS/OMS or hosted. and in real-time post-trade monitoring of positions. Does your offering integrate with EMS/OMS platforms? What risk methodologies are supported? Easy Trade Risk Manager is available as a separate solution with a A number of risk variables are calculated on accounts and well-defined API or integrated with other components of Easy Trade. portfolios.Risk variables are functions of positions and dynamic data Easy Trade Risk Manager has been integrated with many available on financial instruments.They include P&L, greeks, margin require- EMSs/OMSs and with banks’proprietary OMS platforms. ments, market value, collateral usage and more. Can third-party valuation models or other services be What asset classes are covered? incorporated with your product? Bonds (zero coupon, fixed coupon, floating rate), equity,stock and Easy Trade Risk Manager can be easily extended with third-party index futures, options (stock, index, currency), forward and swaps, FX, calculation libraries. and CFD. What report-generation capabilities are offered? How often is risk calculated? The system has built-in report capabilities but also can be All information is managed in real time and the system is designed integrated through the API to external reporting tools. to process complex evaluations (margin calculations) in less than 150 Contact Information microseconds, making the system useful in pre-trade validation of Mirko Marcadella DMA order flows as well. 39-02-583431 [email protected] www.itsoftware.it

Misys Misys Summit Invest and Misys Risk Vision Description of Service Is the product offered as a managed or hosted service or as Misys Summit Invest is our solution for the buy side, enabling asset an installed solution? managers, hedge funds and asset servicers to operate efficiently and It can be offered hosted as well as installed. minimize risk when handling OTCs and derivatives.Misys Risk Vision Does your offering integrate with EMS/OMS platforms? is an enterprisewide risk management system used by banks to Standard gateways enable this integration. manage their market risk, credit risk and limits in an integrated way Can third-party valuation models or other services be with a single view of all risk exposures across all business areas. incorporated with your product? What risk methodologies are supported? Yes.We have partnered with Pricing Partners and Numerix for We provide different methodologies for the calculation of VaR, integrated pricing, and we provide the facility to input prices from including Monte Carlo, historical simulation, parametric, risk external services, such as Markit. decomposition, marginal/incremental/component VaR and more. What report-generation capabilities are offered? What asset classes are covered? We offer more than 100 out-of-the-box reports. Hundreds of asset classes, including all forms of OTC derivatives. Contact Information How often is risk calculated? Michelle Green In real time, at the end of the day,weekly and monthly. 20-3320-5589 [email protected] www.misys.com

Northfield Information Services Portfolio Optimizer and Analytics Description of Service Does your offering integrate with EMS/OMS platforms? Northfield provides a wide range of portfolio analytics and risk mod- No. els deployed through state-of-the-art portfolio optimizer,perform- Can third-party valuation models or other services be ance attribution and asset allocation systems. incorporated with your product? What risk methodologies are supported? Yes. Descriptive and non-descriptive factor-based methodologies are What report-generation capabilities are offered? supported. Text-based reports. What asset classes are covered? Contact Information Equity,fixed income, structured products and real estate. Ghazanfer Baig How often is risk calculated? 617-208-2032 Daily and monthly. [email protected] Is the product offered as a managed or hosted service or as www.northinfo.com an installed solution? Installed solution as well as hosted through strategic partners.

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Patsystems Risk Informer Description of Service Does your offering integrate with EMS/OMS platforms? Provision of our Risk Informer product to measure risk in real-time. Yes. What risk methodologies are supported? Can third-party valuation models or other services be SPAN,TIMS and other standard exchange methodologies. incorporated with your product? Yes. Client's proprietary methodologies. What report-generation capabilities are offered? What asset classes are covered? Reports can be generated online using the standard user interface ETFs and options, FX, FX options, CFDs, equities, and bonds. or as scheduled tasks. How often is risk calculated? Contact Information Real-time as trades are executed and prices change. Sean Barry Is the product offered as a managed or hosted service or as 312-542-1347 an installed solution? [email protected] It can be supplied as an installed solution or hosted at our data centers. www.patsystems.com

Riskdata Risk Management Solutions Description of Service Is the product offered as a managed or hosted service or as Riskdata offers pioneering tools to assess and manage complex an installed solution? short- and long-term risk exposures, including scenario analysis, Riskdata offers combined installed and hosted architecture.Several extreme risks and changing correlations.Riskdata manages both sys- options are available, ranging from fully hosted to fully installed, but tematic and specific risks, combining return-based and position- the recommended solution is an optimized sharing of tasks. based analysis in order to account for 100 percent of the portfolio as Does your offering integrate with EMS/OMS platforms? well as funds dynamics. Riskdata applications include an API that enables the user to update What risk methodologies are supported? risk figures through real-time interfaces with EMSs/OMSs. Monte-Carlo “Risk Ticker”methodology: Riskdata uses a VaR model Can third-party valuation models or other services be based on Monte Carlo simulation performed in a high dimension, incorporated with your product? with full reevaluation.Nonlinear factor models or StressVar: StressVaR Riskdata products are easy to integrate with other existing systems is a proprietary Riskdata methodology applicable to a wide range of and external data feed vendors.The import of a user’s universe of investments.This risk profle is obtained by calibrating a so-called assets and return series into Riskdata’s application can be achieved poly-model. with the straightforward import and export of industry standard CSV What asset classes are covered? data files.Users’or third parties’security pricers can be integrated Riskdata offers a true cross-asset-class system, with full revaluation in into Riskdata analysis upon request, with our custom pricer high dimensions and real-time Monte Carlo simulations.This allows encapsulation tool. the user to have a comprehensive risk view of the overall portfolio What report-generation capabilities are offered? across multiple asset types. Fully customizable reporting via integrated report writer. How often is risk calculated? Contact Information Risk can be calculated at any frequency.Real-time full risk re- Joelle Hadida computation and pre-trade risk contribution analysis are available 212-931-5794 thanks to patented Risk Ticker technology. [email protected] www.riskdata.com

Sophis Sophis Value Description of Service What asset classes are covered? Sophis Value is a cross-asset portfolio and risk management solution Equities and derivatives, fixed income, IR derivatives, credit dedicated to the buy side covering the whole STP process: invest- derivatives, convertible bonds, FX derivatives, commodities, securities ment management, risk management, middle/back office and lending, structured products and hybrids. accounting.It combines broad instrument coverage with high per- How often is risk calculated? formance and an open, flexible architecture. In real time, at the end of the day,weekly and monthly. What risk methodologies are supported? Is the product offered as a managed or hosted service or as A full range of risk analytics and scenarios are supported, including an installed solution? pricing, valuation, historical, Monte Carlo and parametric VaR, dynam- Sophis Value is an installed solution. ic stress tests, what-if scenario analysis, Greeks and sensitivities, real- Does your offering integrate with EMS/OMS platforms? time P&L consolidation and P&L decomposition, and PFE. Sophis Value is delivered with standard interfaces to BondVision,ICE Link,Omgeo,SunGard Global Trading,Trading Technologies,TradeWeb,

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Sophis (continued) Sophis Value and Trading Screen,and integrates easily with other EMS/OMS platforms. produce reports from any functional area of the system.The report- Can third-party valuation models or other services be ing engine enables the automatic generation of custom reports for incorporated with your product? internal use on fund management, compliance, risk control, middle Yes.Third-party valuation models and external pricing libraries can office, performance and accounting, and for external use with be easily incorporated within Sophis Value.The system allows the investors, partners and prime brokers. addition and extension of every financial product via our C++/C# Contact Information Software Development Kit in terms of data models, pricing models Eric Bernstein and GUI presentation. 212-625-89 00 What report-generation capabilities are offered? [email protected] Sophis Value includes an integrated reporting engine that can www.sophis.com

Sophis iSophis Description of Service Is the product offered as a managed or hosted service or as iSophis provides integrated portfolio, risk management and per- an installed solution? formance attribution services through an ASP model with minimum iSophis is available via a hosted, software-as-a-service model. client infrastructure.It is targeted at hedge fund managers that want Does your offering integrate with EMS/OMS platforms? to benefit from leading-edge analytics for P&L, risk and iSophis is integrated directly with the prime broker.It reflects the performance measurement in a secure, hosted environment. positions and transactions of the prime broker. What risk methodologies are supported? Can third-party valuation models or other services be Comprehensive risk analytics are supported,including maturity,credit, incorporated with your product? Rho,forex and futures analyses.Counterparty risk and credit exposure. iSophis is powered by Sophis Value, which can easily incorporate Parametric VaR.Configurable stress tests and what-if scenario analysis. third-party services and valuation models. What asset classes are covered? What report-generation capabilities are offered? Equities and derivatives, fixed income, IR derivatives, credit deriva- Comprehensive risk reporting services,including position keeping,risk tives, convertible bonds, FX derivatives, commodities, securities lend- analytics and reporting,portfolio reports,and performance attribution. ing, structured products and hybrids. Contact Information How often is risk calculated? Marc Bothwell End of day,weekly and monthly. 877-767-4471 [email protected] www.isophis.com

Sophis Sophis Risque Description of Service ICE Link, Omgeo, SunGard Global Trading,Trading Technologies, Sophis Risque is a cross-asset trading and risk management system TradeWeb, and TradingScreen, and integrates easily with other that enables straight-through processing across a bank’s trading EMS/OMS systems. activity.It combines broad instrument coverage with high perform- Can third-party valuation models or other services be ance and an open, flexibe architecture. incorporated with your product? What risk methodologies are supported? Yes.Third-party valuation models and external pricing libraries can A range of risk analytics and scenarios are supported, including pric- be easily incorporated with Sophis Risque.The system allows the ing, valuation, historical, Monte Carlo and parametic VaR, dynamic addition and extension of every financial product via our C++/C# stress tests, what-if scenario analysis, Greeks and sensitivities, real- Software Development Kit in terms of data models, pricing models time P&L consolidation and P&L decomposition, PFE, counterparty and GUI presentations. risk, and compliance. What report-generation capabilities are offered? What asset classes are covered? Sophis Risque includes an integrated reporting engine that can Equities and derivatives, fixed income, IR derivatives, credit deriva- produce reports from any functional area of the system.The report- tives, convertible bonds, FX derivatives, commodities, securities lending engine enables the automatic generation of custom reports on ing, structured products and hybrids. positions, limits,VaR, instrument exposure, risk analysis and others. How often is risk calculated? Contact Information In real time, at the end of the day,weekly and monthly. Eric Bernstein Is the product offered as a managed or hosted service or as 212-625-8900 an installed solution? [email protected] Sophis Risque is an installed solution. www.sophis.com Does your offering integrate with EMS/OMS platforms? Sophis Risque is delivered with standard interfaces to BondVision,

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portfolio risk management

SunGard Financial Systems SunGard MicroHedge ERM Description of Service Does your offering integrate with EMS/OMS platforms? SunGard’s MicroHedge ERM (enterprise risk management) provides SunGard MicroHedge ERM can easily integrate with OMS platforms advanced solutions for assessing and mitigating risk for securities as well as other risk analysis tools and proprietary data feeds. and associated positions in real time, regardless of portfolio size. Can third-party valuation models or other services be What risk methodologies are supported? incorporated with your product? SunGard MicroHedge ERM evaluates risk on several levels, including Yes.Since SunGard MicroHedge ERM is an open architecture profit analysis, portfolio analysis and risk normalization. solution, other services can be easily integrated. What asset classes are covered? What report-generation capabilities are offered? Listed options and underlying equities, futures and indices. Standard reports that are easily customizable can be scheduled for How often is risk calculated? delivery,e-mailed, archived or printed. Real time. Contact Information Is the product offered as a managed or hosted service or as Dan Tibbets an installed solution? 201-499-5900 A hosted, server-based solution operating in an ASP environment. [email protected] www.sungard.com/microhedge

SunGard Financial Systems SunGard APT Description of Service SunGard APT is accessible via interactive desktop solution (APTPro), APT delivers flexible risk reporting, portfolio construction and rebal- ASP batch-based risk reporting service (APT Raptor), installed batch- ancing via optimization, and related professional services. based risk reporting solution (APT Risk Reporter), Excel add-in (APT What risk methodologies are supported? X-VaR Excel Add-In), and APIs (COM and XML). Our statisitcal multifactor risk model supports a wide range of risk ana- Does your offering integrate with EMS/OMS platforms? lytics,risk attribution methodologies and stress testing capabilities.APT Trade ideas generated via APT can be exported to an OMS via XML also provides a Monte Carlo engine that generates VaR forecasts. interface. What asset classes are covered? Can third-party valuation models or other services be SunGard APT risk models support 300,000 equities,credit (govern- incorporated with your product? ment,corporate,fixed,floaters,bonds with embedded options), Third-party pricing models can be incorporated into our “open path” commodities,funds (mutual and hedge),indices,fx,reits,swaps Monte Carlo engine. (interest rate,inflation,credit default,total return,currency),options What report-generation capabilities are offered? (European,American,barrier,digital,swaptions),futures,and forwards. APT Risk Reporter produces reports in a wide range of formats,such as How often is risk calculated? XML,PDF and Excel.APT Risk Reporter supports a workflow that helps APT fully reestimates its models on a weekly basis for the short-term integrate back-office risk reporting with middle- and front-office port- models and on a monthly basis for the medium-term models.ID folio and risk management functions within a single framework. update files are available on a weekly basis to account for IPOs and Contact Information corporate actions.Higher-frequency updates are made available by Caroline Barr technology transfer to the client site. 44-20-8081-3300 Is the product offered as a managed or hosted service or as [email protected] an installed solution? www.sungard.com/apt/learnmore

UBS Investment Bank UBS Delta Description of Service Does your offering integrate with EMS/OMS platforms? UBS Delta is a multi-asset portfolio analytic tool used by more than Yes.Charles River. 130 institutional clients globally to run market/portfolio analytics Can third-party valuation models or other services be and various risk analysis. incorporated with your product? What risk methodologies are supported? Third-party pricing, CDS curves and correlation curves can be used Parametric and historic VaR. for performance and valuation functions, but third-party pricing or What asset classes are covered? models cannot be used in the risk model. Fixed Income:credit,gov’t.,EM,high yield,swaps,CDS,SCDOs,structured What report-generation capabilities are offered? products,futures.Support of most ABS structures,through UBS Delta Scalable 24/7 reporting capabilities; either pre-defined standard model or Intex (where client holds Intex license).Equities:common stock, reports or bespoke report construction are available. index and single name options and futures.Commodity futures. Contact Information How often is risk calculated? End of day. Dermot Shortt 44-20-7568-6876 Is the product offered as a managed or hosted service or as [email protected] an installed solution? Hosted service. www.ubs.com/delta

34 April 2010 • www.advancedtrading.com • ADVANCED TRADING October 17-19, 2010 Ritz Carlton Golf Resort, Naples, Florida The Trading Desk of theFuture This year’s Summit will focus on the future of the trading desk—covering topics including emerging technologies, optimizing your EMS or OMS, taking control of risk management, the future of dark pools, achieving transparency through advanced TCA tools and reacting to changes from regulation. You’ll hear the perspective of traders from both hedge funds and traditional asset management firms, their heads of trading technology and other well-known industry thought leaders.

Agenda Highlights

• Get to the Point: Predictions, Perspectives and Predicaments • The Future of the Markets – What Lies Ahead? • Dark Pools 2011 • Taking Control of Risk

Network With Your Peers www.advancedtrading.com/summit2010 use code: atvip10 Qualified buy-siders attend for free. For more information, e-mail [email protected]