‘AMS’ Gives Brokers a Leg Up
For brokers below the rarefied air of the so-called bulge bracket, trading as efficiently as the Goldman Sachses and Morgan Stanleys of the world can be an uphill battle.
Innovation is leveling the field of competition, specifically with a recently launched offering that’s meant to complement the OMS and EMS trading-desk mainstays.
“The algorithmic management system is the next generation of technology that’s being built to empower the modern sell-side trader, and evolve their relationship with the modern buy-side trader,” said Joe Wald, chief executive officer of Clearpool Group.
Mid-sized and smaller brokerage firms historically have fallen back on using white-label offerings of Wall Street, Wald noted. “These firms don’t have the domain expertise or the resources to build out a multi-million-dollar technology platform to handle their direct market access, algorithms, and compliance,” he said. “They specialize in research, analysis, corporate calendars, and other things that are tremendously valuable to the buy side.”
But while a white-label product will meet a minimum standard of care, by definition it won’t be as good as what the provider offers to its own customers — otherwise the provider wouldn’t be distributing it.
“When the broker or the broker’s client does their transaction cost analysis, they see it’s a tale of haves and have-nots,” Wald said. “They can have a different execution quality when they go through their regional brokers, white label, versus when they go through the bulge bracket directly.”
Guggenheim Securities started using Autonomy about a year ago, with the aim of optimizing the processes of its cash-equities trading desk. The AMS works seamlessly with the broker’s order and execution management systems, according to Nello Cafcules, head of electronic execution at Guggenheim.
“It provides us with enhanced control over our algorithmic processes,” Cafcules told Markets Media. “Prior to integrating Autonomy, we had limited control with respect to routing protocol.”
“One of the biggest benefits is the ability to change strategies without intense programming,” Cafcules said. “We can change the majority of our strategies’ behavior without complex coding. As a result we are able to hone the algos and optimize execution quality.”
The AMS product was spawned amid a buy side / sell side relationship that has deteriorated amid shortfalls in transparency and trust, more complexity, and heightened sensitivity with regard to conflicts of interest. The overarching question is whether intermediaries are truly putting the client’s interests ahead of their own.
“The algorithmic management system is an extension of the discussion going on in the industry,” said Wald. “Sell-side brokers have been hearing from their buy-side clients that something has to change. The buy side needs a deeper level of transparency with respect to their execution protocol.”
Wald described Autonomy as a full, cloud-based electronic-trading platform, which enables direct market access and algos. About 80 clients signed on in the first year after launch.
“We do not solicit the buy side, but they have become advocates by telling their brokers ‘Hey, this is the kind of technology you’re going to need to have in order to retain my order flow and be a meaningful counterparty for me’,” Wald said.
“If you look at an OMS or an EMS, they are ecosystems that accommodate full circles of workflow,” Wald added. “The AMS is exactly that, but for the trader who uses algorithmic strategies.”
Agency broker moves beyond execution to offer a broader suite of services.
Algorithms have become more prevalent in the spot FX market.
QB’s Algo Suite for futures market trade execution is also being co-located to HKEX.
Breaking data silos is key to deploying automation beyond 'nuisance' orders.
They can be used on quantum hardware expected to be available in 5 to 10 years.