The electronic financial markets are transforming at light speed across both “low-touch” and “high-touch” execution models. The regulatory environment is one catalyst leading the charge via MiFID in Europe and Reg NMS in the United States, along with the continued electronic evolution of global markets.

Execution destinations are transforming themselves as a result of competitive pressures brought on by operating as ‘for profit’ entities, through consolidation, improved technology, enhanced functionality and broadening the products and services they offer to market participants.

In response, brokers are being forced to provide new products and services such as sophisticated algorithms and more targeted functionalities across a broad range of asset classes to help their valued clients achieve best execution regardless of size or complexity of an order. Institutional traders increasingly require access to multiple brokers based on criteria such as service, content and expertise. And all the while, quote rates continue to exponentially increase.

As a result, trading grows even more complex, requiring new technologies to capture market opportunities as they arise- often in a matter of milliseconds. For many traders, this translates into multiple terminals on their desks, each with a different purpose and content. And many still wonder, can’t one common system link them all together in a single trading platform?

The good news is that the technology is already available. But to get to where you need to be, you need straight answers from your Execution Management System (EMS) provider on the following:

Is my EMS seamlessly integrated with the data and content I need?

More and more EMS’s have been designed to integrate sophisticated streaming data and value-added content alongside full trading functionality. If you still source the majority of your data and content from an external application as opposed to your EMS, you stay a step behind by introducing a level of “human” latency into the trading equation.

What’s more, with the advent of fiber optics, order routing can now technically approach the speed of light. But if critical seconds are wasted toggling between applications and populating order screens, all the advancements in order routing technology are for naught.

That’s why it’s important that you find out if your trading data and content is coming directly from the provider of your EMS and not a third-party source. Additionally, the provider should have its own direct connectivity to global liquidity sources. External data sources may appear seamlessly integrated into your EMS, but may in fact introduce hidden latency by going through an extra hop or two before appearing on your screen. The less hops, the better.

What is the speed, breadth and quality of the data and content I use to make trading decisions?

There was a time in the not so distant past when simply the availability of “streaming” data more than sufficed to meet the needs of most traders.Now it’s not even enough to just keep you in the game. You need data and content of the highest quality and lowest latency if you want to compete with those traders already armed with this.

Current quote rates are approaching an order of magnitude of several hundred thousand quotes per second. To put this in context, just 18 months ago, breaking the six-figure mark was considered a major milestone. A million quotes per second (QPS) is just around the corner. But can your provider keep up?

In such an environment, the margin of error decreases for displays which slow down or even freeze following major market announcements or other periods of heavy activity. If this is already happening to you--translating into missed opportunities--then right now is the time to move on. The situation is likely to deteriorate as exploding quote volumes put an additional burden on your provider

Ask your provider about QPS currently being delivered, their overall capacity and future expansion plans. Find out if their technology is scalable or if they need to rebuild it from scratch. Simply put, if their technology is not state of the art, then you will not be able to achieve best execution. Other questions to ask about your provider’s data:

• Where are their data centres physically located?
  

• Do they provide hubs in other locations?
  

• Do they automatically scrub the data?
  

• What connectivity options do they offer to the end-user? Internet, direct feed, financial extranet?
  

• Do they offer a full depth of book quote display where available by source?
  

• Does the full breadth of data encompass multiple asset classes across global liquidity providers?
  

Can I trade multiple asset classes across multiple regions on my platform?

Cross-asset strategies are now the name of the game, and the days of single- or limited-asset class terminals are numbered. Exchanges are introducing new products weekly, and the financial markets are becoming more and more co-mingled across assets.

To maximize speculative and hedging opportunities, traders need to be able to trade stocks, futures, options, forex, bonds and ETFs across global markets on a single platform. Traders who continue to execute cross-asset strategies using separate and distinct platforms for individual asset classes or brokers risk compromising the latency and quality of execution..

By choosing an EMS that provides a centralized, global view of positions across asset classes, P&L and other critical trading information within a single, tightly-integrated platform, you can ensure best execution, limit risk and reduce mistakes commonly made when trading multiple asset classes on separate platforms.

Is my trading platform limited to a single broker or do I have access to a broad network of brokers through a single terminal?

Investment managers today engage in multiple brokerage relationships simultaneously, both to preserve anonymity as well as to have access to an appropriate range of specialized products and services. These can include proprietary research, analytics, algorithms and specialized execution services. That’s why a multi-broker, multi-asset trading platform has become one of the primary demands of the buy side.

If you’re still using multiple platforms across brokers, you’re incurring needless expenses, limiting efficiency and introducing risk by not having a global view of your trading positions in real time.

Ask your provider to describe the list of brokers that you can connect to through their platform along with the steps involved in adding additional broker destinations. Go a level deeper and find out which asset classes and regions are available, along with what types of functionality and order services are built directly into the platform. The best platforms will provide the quick and efficient addition of new destination brokers as well as a full complement of execution functionality, analytical tools, market data and content services.

Is my EMS platform truly broker neutral?

Being multi-broker doesn’t always equate to being “broker neutral.” To preserve the anonymity of your order flow, ensure that your EMS provider is truly neutral and is not preferencing certain destinations or liquidity pools, and maintains separate locations, staff, infrastructure and networks from that of any other broker on its network. Be satisfied that controls are in place to provide full broker neutrality to all customers.

Can I get my broker’s proprietary content such as a transaction cost analysis and research through my EMS platform?

Your EMS should be able to provide you with the capability to view external content via an integrated web browser. This content can come from your preferred brokers, news providers, or other free and premium content providers accessible on the web.

Some EMS providers even allow you to view content in a single integrated format. Specially designed web pages can be built to function similarly to other windows in your EMS. You can populate quote lists, order windows and access other specialized functions via a single click on a symbol on the web page.

Does my platform have an open APIwith order scripting so I can feed data to my own applications and create black box trading models?

No matter how flexible and powerful an individual EMS may be, some traders may still want to build specialized trading models best suited to their market strategies. Some providers have developed interfaces which allow their data to populate into standard Excel spreadsheets, while others allow further flexibility by automatically populating custom-built applications. The best providers integrate order routing capability triggered directly from these user-built models, allowing you to take full advantage of their robust routing networks. Beware of the EMS provider that holds you captive to their graphical user interface. Instead, seek a provider that allows you to use the specific attributes you require.

Summary

Thanks to recent advances in technology, what was once thought of as the elusive “Holy Grail” for traders has become a reality. A multi-broker EMS that can integrate data, news, analysis, direct-access trading and order and risk management tools into a single platform should now be an essential component of the buy-side’s trading desk.

If your current EMS provider comes up short in a few of the areas outlined in this overview, it’s time to consider making a change to the best-of-breed technology you need to thrive in today’s global markets. Townsend Analytics invites you to explore how our RealTick EMS can help you maximize trading opportunities, achieve best execution and minimize risk across multiple asset classes. It’s the platform of the future...available now.

“There was a time when simply the availability of “streaming” data more than met the needs of most traders. Now it’s not even enough to just keep you in the game.”

For more information, please see our directory listing in this issue, visit www.realtick.com or email Sales@taltrade.com

*RealTick is a registered trademark of Townsend Analytics, Ltd.

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