Dash Sets Sights on Buy-Side Growth
To many, Dash Financial Technologies is best known as one of the industry’s leading options trading technology, agency execution and analytics providers. With good reason, too: after launching the firm in 2011 and steadily building the business, both organically and through acquisition – the latter including the acquisition of Convergex’s LiquidPoint business last year – Dash now executes approximately 14% of the entire OCC daily listed options volume, touches an additional 30% via trading workflow and compliance solutions and operates one of the Street’s leading regulatory reporting technology solutions.
But what is less known is the growing momentum in the firm’s buy side business, which started to increase several years ago and has gathered pace significantly this year. Since January, Dash has been on a hiring spree, adding a swath of boldface names from the institutional equities trading industry, including Glenn Lesko, Stino Milito, Jamie Bogen, James Doherty, Peter Mulieri, John King, Barbara Francis and Jennifer Hubbs. Several of those individuals are present in Miami this week at the Equities Leaders Summit, where Dash is a lead sponsor.
For CEO Peter Maragos, the moves are less about focusing on any one particular asset class and more about the firm continuing to execute on its plan to become the technology and analytics partner of choice to both the buy and sell side.
“We are a technology firm, first and foremost,” says Maragos, who co-founded Dash with Chief Creative Officer, David Karat in 2009. “Our platform was architected to be highly scalable and asset-class agnostic and present the buy side with a way to obtain operational alpha from the execution process with a transparent, data driven, consultancy approach. Also, since we included real-time transparency in our model from the outset, we have had time to continually innovate new visualization techniques and analytics and this suite inspires actionable intelligence which ‘explain’ the data to professionals who may not have had an execution background, and squeeze the juice out of performance, however they define it.”
For Dash, knowledge of every facet of how an order was handled – what Maragos calls “radical transparency” – is the foundation on which the business was built.
“The most advanced fund managers today look at trading as a science: test, measure then refine,” he says. “But without full transparency into exactly what occurred from the moment the order was sent – filled or unfilled – the ability refine is significantly impaired. Transparency is essential.”
Dash provides this transparency via Dash360, a real-time, web-based, HTML5-based dashboard that not only provides intelligence on and visualization of every aspect of the routing process, but also the detailed exchange fee/levy breakdown and performance analysis.
Dash works with clients to shape the execution process for optimal performance, regardless of whether it is a short-term alpha strategy, struggling to capture institutional-sized volume, or a passive strategy with little momentum seeking to optimize the cost of the execution process. Many of Dash’s clients opt to leverage a “cost-plus” pricing model whereby its commission/technology fee is fixed and the various exchange/venue fees and rebates are passed on directly to the client. The firm says this transparent, holistic approach to examining trading costs can help cure many of the perceived ills with today’s markets, in particular rebates.
“Rebates themselves aren’t a bad thing. When used properly they lower – sometimes drastically – transaction costs for clients. While cost-plus pricing isn’t always possible for some fund managers, we think it much better aligns the interests of the broker and the client than the traditional commission model does,” Maragos notes.
According to Glenn Lesko, former CEO of Bloomberg Tradebook and Instinet Asia who joined Dash as Chief Growth Officer in June, the ability to use this transparency to devise custom solutions in collaboration with clients is what drew him to the firm.
“Best execution is unique and is measured and defined differently by every fund manager, as it should be. Our job as a technology provider is to work hand in glove with our clients to create custom routing strategies and workflow solutions that are calibrated to their precise performance objectives, and then continue working with them to calibrate and refine those over time.”
But looking at transparency and customization tools simply as a means to tick a compliance box is only part of the story, according to Lesko.
“It’s no secret that fund managers are facing major headwinds on many fronts: increasing compliance and technology costs, decreasing commission wallets, mounting competition from passive managers, etc.,” he says. “That means they are starting to look to new avenues for edge, and trading can and should be one of them. New technology tools are definitely starting to drive alpha – that’s one of the biggest areas of discussion we’re having with our clients.”
With their multi-asset platform in place and MiFID II’s impact being felt globally, Dash has spent considerable energy looking to engage with the institutional trading community. Their new hires bring considerable cache with the buy side: Bogen is a Traders Magazine Wall Street Women award winner, Doherty was one of the architects of Credit Suisse’s AES business, and Francis and Hubbs are longtime veterans of the portfolio trading world, with Francis having previously served in senior PT roles at Bloomberg Tradebook, Liquidnet and ITG.
Francis and Hubbs joined the firm in January to build an industry-leading portfolio trading solution and announced the solution in production in September.
“We felt strongly that the market was underserved by some of the legacy portfolio-trading solutions available today,” says Francis. “By building an advanced new solution that includes real-time, integrated analytics and is agnostic to the EMS or OMS through which it’s accessed, we think we’ve crafted a new standard in the space.”
Rob McGrath, who spent nearly 15 years as Global Head of Trading for Schroders and late last year moved to Abu Dhabi to serve in the same capacity for ADAI, agrees.
Dash has carved out a dominant position in the options world and we’ve been impressed with what they are doing in equities,” he says. “Through the transparency and customization capability their platform provides, they solve for some of the bigger challenges that the buy side trading community faces today.”
Several in the industry have noted that Dash is one to watch as industry consolidation continues. The firm, which is management owned, recently partnered with private equity firm Flexpoint Ford. Flexpoint Ford Principal Daniel Edelman made no secret of the firm’s desire to be growth-oriented.
“We have known the Dash management team for some time and look forward to helping them to build upon the firm’s significant success to date by both accelerating current organic growth and by pursuing potential adjacent acquisitions, similar to the highly successful LiquidPoint transaction,” Mr. Edelman said in March when the deal was announced.
While Maragos was vague about what’s to come, he confirmed that the firm is well-positioned to be one of the winners.
“Our business and technology platform have been built to be highly scalable and asset-class agnostic, allowing us to expand in to new areas and geographies very easily,” he said. “We have a partner in Flexpoint Ford with whom we are in complete alignment about our strategic goals, and we are aggressively working to pursue our growth plans, both organically and inorganically.”
With Adam Conn, Head of Trading, Baillie Gifford
With Ankit Mittal, Business Change Manager, Global Trading, Schroders
FIX EMEA Trading conference panelists cite regulation, ESG, and data and analytics as priorities.
With Alison Hollingshead, Chief of Staff, Trading Platform & Core Technology, and Sam Ratcliff, Head of Execut...
Valéry Derbaudrenghien of Robeco works to optimize workflow while reducing operational risk.