Fund Managers Change Research Spending

Terry Flanagan

Tom Doris, chief executive of OTAS Technologies, said his firm saw a rise in interest from fund managers after the UK regulator began reviewing how dealing commissions are used to pay for research.

OTAS Technologies launched three years ago to analyse market data and highlight actionable information for equities trading to fund managers in an easily digestible visual format. The software analyses changes from the normal pattern in data such as insider transactions, short interest, options and credit default spreads.

Doris said cash equities traders will look at data from other markets such as options or CDS in an ad hoc fashion while OTAS automatically highlights the most relevant signals for stocks in their portfolio so they can be quickly reviewed at the start of each day. The platform covers most of the investable equities universe through analysing more than 8,500 global stocks.

Doris told Markets Media: “Our product is a substitute for a call to external sources and therefore reduces the risk of information leakage. We saw an increase in interest after the FCA released its consultation on commissions and we are confident our approach will provide an advantage in the longer term as it is evidence-based.”

Last year the Financial Conduct Authority, the UK regulator, began consulting on how fund managers use dealing commissions to pay for research. The UK National Association of Pension Funds said in February that the current model for paying for research leads to the creation of too many conflicts of interests, an over-use of and over-supply of external research and a significant lack of transparency to clients.

Last year OTAS introduced TradeShaper, to provide intraday analysis of how an individual shares trades versus general expectations so the buyside can tailor their trading, For example, for a specific share on a certain day it may better to trade passively in the morning and more aggressively in the afternoon.

“We introduced intra-day real-time analytics in the first quarter of 2013 to give buyside firms the same armaments as HFT firms,” added Doris.

He said that OTAS is uSed by 75 large buyside accounts and the firm is targetting individual hedge funds and more partners amongst execution management systems. “One vendor told us that trading analytics is the next battlefield,” said Doris.

In the next few weeks clients will also be able to analyse in-house data using the OTAS visualisation tools and build their own applications.

Other areas of growth are adding fixed income to the platform and expanding in the US.

“The methodology we have developed will work in fixed income and we are looking at expanding into other asset classes,” added Doris. “Corporate debt trading data should be added in the fourth quarter of 2014 or 2015.”

This week OTAS hired Jennifer Martyn in its US sales team, following the appointment of Nick Lieder this year as head of US sales. Martyn previously worked at Thomson Reuters in the pan European equity research division.

Featured image via Dollar Photo Club

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