Jan 20, 2012
Buy-side shelters under cloud cover
Cloud technology is helping execution management systems
(EMS) vendors to offer greater customisability to buy-side firms without the
need to invest in proprietary hardware and systems, says Ary Khatchikian,
president and CEO at EMS provider Portware.
Khatchikian founded Portware in 2000 with partner Eric
Goldberg, having previously worked at order management systems (OMS) providers
such as Merrin Financial, founded by Liquidnet CEO Seth Merrin. Dissatisfied
with what he saw as a lack of flexibility in the standard EMS, he determined to
find a better solution using the latest technology.
“One of the major reasons for starting Portware was that
while working at an OMS vendor, I saw how clients were very frustrated with not
being able to use their trading platform to their full ability,” he says. “They
were always at the mercy of the vendor to be able to customise and fine-tune
the product to meet their needs.”
OMSs help buy-side firms enter orders and route them to
brokers; EMSs are more sophisticated systems that handle execution choices
across multiple trading venues and often include other abilities such as
algorithms and market data.
Previously, taking on a new OMS or EMS was a big endeavour
for most investment institutions. It required a lot of internal resources in
terms of manpower, funding and time. But the development of cloud technology,
whereby a specialist firm manages all the hardware and software requirements of
a customer through a remote online platform, has greatly simplified the
process. Today, says Khatchikian, users of modern EMSs need do little more than
login to their system. Everything else is provided by the technology firm
running the cloud – including connectivity and market data.
It also helps reduce costs. For example, many institutions
maintain full-time staff to manage securities classification, which is
necessary because of the sheer volume of corporate actions. “Without a
securities database, nine times out of ten, you can’t trade a security the way
you’re viewing it from your market data provider; brokers will simply reject
orders with improper security classifications,” explains Khatchikian.
With its own EMS offering, Portware provides pre-integrated
market data and security classifications to its clients, through a partnership
with Thomson Reuters. The firm’s EMS covers FX, equities, futures and options;
it also allows asset managers to route orders to some 500 venues. It includes
broker algos for FX, as well as a product called Liquidity Monitor, which
allows users to track best execution. The technology is built for handling
multiple assets at the same time, so users can also automatically hedge their
currency exposure when trading foreign securities, for example.
Portware divides its offerings between Enterprise – which is
designed to be entirely customisable – and Pro, which is intended as a scaled
down version aimed at emerging markets hedge funds, mid- to lower-tier firms
such as Axiom Investment Management, based in Hong Kong. Enterprise alone
enables users to link to proprietary risk and external position systems, but users
of Pro can be quickly upgraded to Enterprise, should they wish for more
customisation.
"Portware Enterprise is designed for clients who want
to customise their front-end trading environment, connect to specialised
workflow applications or develop proprietary order routing strategies,” says
Khatchikian. “Portware Pro targets clients who want an out-of-the-box
solution.”
Both systems provide automated issue detection. For example,
if a buy-side user routes an order to a broker and does not receive a response,
the system will automatically notify the broker and request a reply. The
buy-side user is also automatically informed, cutting down on the time that
would otherwise be needed to resolve the issue.
While buy-side requirements continue to expand, the same
cannot be said for their budgets – a factor that will no-doubt assist firms
like Portware as they expand their reach, both geographically and in terms of
product range.
"We are expecting more growth in FX, options,
derivatives, futures this year,” says
Khatchikian. “We hope to reach new regions and expand our presence in Asia
Pacific, and drastically grow our user base for the Pro and FX platforms.
We’re also branching out into other products, such as wealth
management."
With budgets pinched due to a combination of restructuring
and a stormy economic climate, it may still be raining in some parts of the
securities industry. But with cloud technology offering a way to cut back on
the cost of their technology umbrella, some buy-side firms may have found their
silver lining.
Elliott Holley
+44 (0)20 7397 3820
elliott.holley@information-partners.com