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Liquid Bolsters Pre-Trade Compliance in Private Cloud-Based OEMRS

Hedge fund managers are demanding compliance aggregation and risk measurement tools to generate alpha and prove they have institutional quality controls.

Liquid Holdings Group has beefed up its pre-trade risk and compliance controls as part of its mission to cater to hedge funds with a single order and execution real-time risk management system.

In addition, New York-based Liquid announced the addition of index options trading capabilities and expanded global equities markets coverage for clients taking using version 3.7 of the Liquid platform.

“We’re providing a comprehensive, mission critical platform around trading and execution and all things that hedge funds do,” said Robert O’ Boyle, EVP, sales and marketing, Liquid Holdings Group, in an interview.

“Specifically when looking at the OEMS and OERMS space, we saw an opportunity to continue to enhance the pre-trade compliance and worked with the marketplace to address some key areas,” said O’Boyle.

Pre-trade risk tools have become necessary for hedge fund managers to ensure that trading activity does not breach investment mandates prior to placing a trade. In version 3.6, Liquid’s sub-millisecond pre-trade risk engine now includes net exposure limits, underlying exposure as a percentage of portfolio exposure limits, and position size as a percentage of the average daily volume limits, as part of its library of configurable controls, according to the release. “It’s really dialing in the ability for portfolio manager and trader to get very granular around how they want to measure and monitor their risk,” said O’Boyle.

A lot of the new pre-trade risk functionality had to do with the aggregation of compliance monitoring around Greek sensitivity and VAR analysis, because customer use that to make investment decisions, said O’Boyle. The company also built stronger data analysis on the trading side, particularly around the compliance aspect, reporting and monitoring of trade decisions “to make sure these were the right decisions and were agreed to by investment managers,” said O’Boyle. By and large, pre-trade risk and compliance tools are in demand so that hedge funds can ensure that they adhere to the investment guidelines they’ve provided to investors. “The regulatory aspect is adhering to the commitments to investors,” explained O’Boyle.

Hedge funds are using the risk analytics and risk measurements as a critical driver for generating alpha and to make investment decisions. “This is all around the concept that as hedge fund managers seek larger allocations, it’s imperative that they demonstrate institutional quality controls,” he said. Because investors have a heighted interest in infrastructure, he said the firm is continuing to add infrastructure and decision support tools to its OEMRS.

Since a sizable part of its customer based is non-U.S. based, Liquid is also focusing on expanding global equities markets coverage. In this new version, portfolio managers and traders can now execute on global equities market including OMX Nordic, Stockholm and Helsinki, Oslo BORS, Vienna Exchange and NYSE Euronext – Brussels. Mp> As a result of signing a strategic channel agreement with UK-based Global Prime Partners, a boutique prime brokerage program, Liquid has signed a number of overseas-based clients onto the platform, and 30 percent of its clients are now global, according to O’Boyle.

Clients include hedge funds as the vast majority as well as family offices. “It’s anybody who is really focused on return generation through alpha, as opposed to traditional registered investment adviser (RIA) or high net worth. It’s about finding performance against a strategy, as opposed to financial planning or measurement against a benchmark, said O’Boyle.

Liquid officials, who came out of the hedge fund industry, said the firm continues to support the concept of a single OEMRS integrating order execution management real-time risk system that also includes shadow NAV, within a single platform.

The OEMRS runs on a private cloud that was purpose-built which allows it to be nimble and responsive to clients, he said. Because it’s managed as a hosted solution or Software-as-a-Service (SaaS), there is no installation of local software required to upgrade clients. He noted that Liquid is already in the development phases for versions 3.7 and 3.8, and that the company takes an “aggressive cadence” to its development approach to meet the needs of hedge funds.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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