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Profiting From the Data Deluge

As featured in The Trade 100

The spread of electronic trading across asset classes poses significant challenges, but investment managers that can harness the data explosion to deliver better performance will thrive, says Michael de Verteuil, business development director, member of the executive board at Linedata.

What a difference a decade can make in trading. In 2004, buy-side traders could call a handful of their sell-side counterparts, request the best price and then book the trade with the broker-dealer who offered the best quote. Today, that workflow is becoming an endangered species. Even in quote-driven fixed income markets, once bastions of voice trading, traders are increasingly searching for liquidity on electronic quote aggregation platforms. Two of the key themes in the post crisis environment – transparency and efficiency – are only accelerating this shift.

The migration to electronic trading increases the scope for buy-side firms to execute more complex trading strategies, including cross-asset components, that they could not do before due to the lack of necessary data to develop, test and analyze these strategies. And therein lies the rub. In the same 10 years that over-the-counter markets have consolidated and gradually adopted electronic trading, the buy-side has gone through its own consolidation. But in many cases, the process has not been completed at the operational level, leaving firms with multiple order management, execution management and accounting platforms, which they knitted together in order to operate.

Alpha generation

Not only is it expensive and time consuming for buy-side firms simply to maintain their complex and bespoke trading infrastructure, it also deprives them of the ability to invest more of their finite IT resources in innovation and alpha-generating opportunities. And as portfolio managers rely more intensively on detailed data analysis to identify and harvest alpha, maintaining these de-centralized trading infrastructures promises only to become a more expensive proposition for their firms, as well as a barrier to better performance.

With technology becoming a more integral factor in their asset manager’s armory, buy-side firms might consider conducting a costbenefit analysis on their current trading infrastructure to determine whether the resources needed ‘to keep the lights on’ could be better spent simplifying their trading infrastructure by adopting a centralized trading platform. The likely benefits would be immediate in terms of less integration support between disparate trading systems and more flexibility and efficiency in trading across different asset classes. Nuances between asset classes will remain for the foreseeable future, but that does not mean the trader must battle with multiple systems to exercise his or her multi-asset skills. Also, moving onto a new centralized trading platform provides institutional investors with the opportunity to leverage the benefits of the hosted application business model, which takes capitalbudget items and transforms them into reasonable operations-budget items.

Linedata has offered hosted versions of our order management, execution management and compliance platforms for over a decade and we have a vast amount of experience in supporting clients small and large. While hosted offerings were initially designed for limited IT budgets, larger clients now embrace them as they optimize their IT spend. Software-as-a-service deployments represent approximately half of all of Linedata implementations. Moreover, to ensure an optimum user experience, we took the decision to ensure that our hosted and internally implemented solutions offer the same functionality and security for web-based and handheld users.

Although what runs a centralized trading platform is important, the information that appears, and how it is presented, on the platform’s screens is more important. Data is meaningless if a trader cannot interpret it quickly enough to identify trends that support trading decisions. As such data visualization tools become critical; robust, flexible and above all interactive interfaces are essential – and not just for the buy-side trading desk. Every business group that touches a segment of a trade’s lifecycle in the front, middle and back office are swamped with more data then they ever had previously.

An end to upgrades

The only way to present the most amounts of data in the most concise fashion is to deliver it in a graphical format. Four years ago, Linedata redesigned our trading platform with this in mind and without clients needing to go through a major version upgrade. Similarly, we redesigned our hedge fund offering two years ago and plan to incorporate the same changes in our order management system and compliance products over the next two years.

Over the same period, Linedata also enhanced our platforms by introducing downloadable widgets that will expand our products functionality without requiring the typical platform version update. It is the same model used by the most popular handheld providers. The wholesale embrace of electronic trading has increased exponentially the need of buy-side firms to handle data flows. This means not only digesting the data, but making it actionable, on the trading desk and throughout the investment process. Deploying hosted centralized multi-asset electronic trading platforms like those from Linedata, can provide buy-side traders with more valuable data-driven analysis with which they can use to execute their portfolio managers’ investment strategies while reducing the maintenance and support costs to their firm.

Learn more about Linedata Trader+

For more information, please contact:
Holly Clifford
--- Global Marketing Product Manager --- Asset Management
Tel: +1 617 912 4844
@ Holly.Clifford@na.linedata.com