Drive for Multi-Asset Trading Continues

Terry Flanagan

Asset managers are talking up the benefits of multi-asset class trading systems, among them the ability to trade systematically across all regions of the globe.

“We have clients with assets that are invested in equities, bonds, fixed income, and to a lesser extent derivatives,” said Nick Burchett, head of dealing at Investec Wealth and Investment, which manages over $50 billion. “If you say equities and derivatives should be on the same platform, maybe equities and bonds or corporates or treasuries should be on the same platform as well. What I would love to do is to see bonds sit on the same platform as equities.”

Although most investment strategies rely on correlations between asset classes, the fact that systems for trading those assets reside on separate platforms creates operational inefficiencies, especially when dealing with vendors.

“If you speak to Bloomberg for example and say, ‘I’m an equity house, I want to speak to somebody about equities,’ you’ll speak to somebody,” said Burchett. And if you want to speak to somebody about bonds you’ll speak to a completely different department. The trouble is we have feet in both camps and actually we want to have a multi-trading platform which treats each instrument as one.”

When investment managers need to rebalance a portfolio, the traders must often scramble to execute the trades. Investec, for example, uses an internal order management system that lumps various assets together. “It doesn’t care if it is an equity or a bond; it’s 1 pipeline, it’s 1 bit of plumbing,” said Burchett. “And when we get it to the other end then we’ve got to do something with it. So I mean that’s really where I’m coming from.”

Exchanges are building multi-asset class trading capabilities into their platform in order to accommodate their global constituencies.

Abu Dhabi Securities Exchange (ADX ) has launched a new trading system, X-Stream Trading, developed by NASDAQ OMX. The final full-function test of the system was completed successfully by ADX on April 12.

The new multi-asset trading platform will improve ADX ‘s trading performance and transparency, and ensure low latency in pre- and post-trade or “at trade” risk management checks. It will also allow faster back office reconciliation of transactions.

The agreement for the provision of X-Stream Trading was signed between ADX and NASDAQ OMX in May 2012. The agreement extended the existing management contract with NASDAQ OMX for a further 5 years, and for the upgrade to X-Stream Trading which has now been achieved. NASDAQ OMX has been providing ADX with technology support since the latter’s inception in 2000.

“The launch of X-Stream is the culmination of a vast amount of work done by both ADX and our partners at NASDAQ OMX to achieve a faultless transition, and it is a proud moment for us to make X-Stream available for our investors, brokers and other stakeholders,” said Rashed Al Baloushi, CEO of ADX, in a statement. “This is not just about the adoption of world class technology – it is about the aspirations of ADX to be a world class window for investors into the opportunities that Abu Dhabi offers.”

For Investec, it all comes down to communication between the portfolio managers and traders regarding liquidity. “The whole game for us is all about liquidity. Can you source the stock? Can you source the bonds? There’s no point in trying to buy them if you can’t,” said Burchett. “It’s really a 2 way sort of conversation and my team will always look at it and say, ‘I can find you stock in there or I can find you bonds in that.’”

Featured image via iStock

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