Multi-Asset Trading Drives Front-to-Back Office Change

Terry Flanagan

The need to trade multiple asset classes is the impetus for improving technology across the front-, middle- and back-offices.

Over the past two years, trading technology provider Object Trading has expanded its global exchange coverage to include direct access to the Nordic, Brazilian, Malaysian and Taiwanese marketplaces, bringing Object Trading’s total global coverage to over 50 markets, while asset class coverage now includes physical cash FX in addition to equities, FX and exchange-traded derivatives.

“For the buy side, our global platform enables them to identify and employ trading strategies that they might not have thought of previously,” said Steve Woodyatt, CEO of Object Trading. “Chasing alpha is no longer about latency arbitrage or single strategies or even single asset classes. We provide the buy side the tools to choose venues, asset classes, liquidity pools, and aggregate risk across one or more prime brokers, for the broadest spectrum of asset allocation.”

Object Trading provides buy and sell side market participants with Direct Market Access (DMA) infrastructure for electronic exchange connectivity specifically engineered for high performance trading applications. Its FrontRunner suite offers low latency, high volume order management, coupled with integrated real-time price distribution and pre-trade risk management.

“Pre-trade risk management is a major factor for the buy side, in the wake of MF Global and similar episodes,” said Woodyatt.

On the post-trade side, financial firms are increasingly turning to external solutions providers as a way to attain post-trade processing simplicity while reducing technology costs and risks and enabling easier entry into new asset classes.

“In recent years, multi-asset class trading has exploded as buy- and sell-side firms utilize a broader array of investment strategies to improve performance and outperform their peers,” said David Campbell, senior strategy and product manager, securities processing solutions, international, at Broadridge Financial Solutions. “This diversification has occurred across both asset segments and geographies as firms seek out new opportunities for growth.”

Centralizing post-trade operations affords brokers enhanced business opportunities, streamlined operations and reduced operating costs.

“As trading across multiple asset classes increases, operating in silos is no longer an effective strategy for optimizing operations, mitigating risk and capitalizing on market opportunities,” Campbell said.

Issues associated with cost, compliance and capability are also forcing firms to consider outside vendors for functions that until recently had typically been run in house.

“Managed services allows firms to maintain control of the critical functions that provide competitive advantage, whether in risk management, trading strategies or customized client solutions, while reducing support burdens where specific resources are lacking,” said Woodyatt. “Do I really need to invest time and effort in managing that, or can I use a trusted partner to provide and manage that service, and concentrate on developing new trading strategies and getting more alpha out of existing ones?”

Three key factors are driving the need for change, according to a report by Broadridge: an increased focus on risk reduction and client service; globalization accentuating the need for efficiency; and rising cost pressures driving consolidation.

Firms need to re-evaluate their approach to multi-asset processing based on the changing requirements of their businesses, their clients and regulators, according to the Broadridge report. This includes the ability to incorporate disparate workflows, maximize efficiency and reduce operational bottlenecks, and identify operations and technology gaps that increase risks to the organization.

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