Gearing Up for the Buy Side’s Global Trading Needs
As buy-side traders in the U.S. continue to set their sights on ever-more-complex global trading strategies, technology-driven firms that facilitate access to international markets have been keeping busy. Global market access providers such as Paris-based GL Trade and London-based Royalblue, for example, have been updating and refining their product offerings in the hopes of attracting new business from U.S.-based buy-side traders - in particular, those with an appetite for greater risk, new pools of liquidity and expanded trading opportunities in far-flung markets.
Other global access providers, such as Orc Software and New York-based Tradeware, that primarily provide their technology to sell-side firms also have been sprucing up their network offerings. Their expectations are that in the months ahead, there will be a far greater demand for their services among their broker-dealer partners in order to meet the increasingly cross-border trading goals of U.S.-based buy-side customers.
"Things are changing in the U.S. right now, and among buy-side traders, there is a much bigger appetite for more-exotic pools of liquidity both in Asia and Europe," insists Philippe Carre, vice president of global client services at GL Trade and head of the firm's newly launched GL Fast service. The new offering specifically aims to serve the global trading needs of U.S.-based hedge funds and buy-side traders.
"This year alone, we have added 40 new brokers to GlobalX, our global market access offering," remarks Howard Schwartz, chairman and CEO of Tradeware, a software provider to the sell side that claims to reduce global trading costs by 75 percent to 85 percent. He adds that he anticipates 40 percent to 50 percent growth per year for the GlobalX service, with increased buy-side activity on the global scene driving the firm's market growth.
A variety of research offers evidence of heightened interest in global trading on the part of U.S. buy-side traders. According to the Russell Investment Managers Outlook, a quarterly poll of U.S.-based money managers, as of March 2006, 57 percent of U.S.-based investment managers were bullish on international equities, maintaining the strong interest they exhibited for much of 2005. And Hedge Fund Research of Chicago reports that 153 new hedge funds were formed last year to invest in emerging markets. Further, over the last two years, trading activity in foreign markets such as India and Russia increased on the order of 141 percent and 150 percent, respectively. What remains to be seen, however, is if over the next year or two, providers that are focused on wide-scale global access - such as GL Trade and Orc Software, for example - will report a notable uptick in their business.
Observers note that global access experts headquartered outside the U.S. have been touting their services to the domestic U.S. market for several years. Despite recent trends, at least one observer, Tom Price, senior analyst at Needham, Mass.-based research firm TowerGroup, questions the ability of these firms to win significant business from more-traditional providers of global access - that is, U.S.-based bulge-bracket firms such as Goldman Sachs and its Rediplus offering; or U.S.-based outfits such as Interactive Brokers of Greenwich, Conn., which provides an online trading system that links to 50 markets in 40 countries and delivers shares, options, futures, forex, ETFs, SSFs and bonds. "Why would I go through the pain of switching service providers, and what is the value-add of these global services for buy-side traders in the U.S.?" Price asks.
GL Trade Offers Fast Connectivity
According to GL Trade's Carre, U.S.-based buy-side traders looking to reach a broader range of markets in Asia, Europe and Africa, and trade a multiplicity of asset classes (excluding fixed income) are his natural client base. The firm offers a front-to-back solution, covering all steps of order flow, he contends. Currently, Carre relates, GL Trade provides access to more than 80 cash and derivatives markets; has 23 offices worldwide, including outposts in Tokyo, Sydney, New York, Madrid, Stockholm and Zurich; and serves more than 3,500 clients, including 500 international financial institutions.
Carre explains that one example of a new user of the firm's GL Fast service is a hedge fund with 10 traders and $2 billion in capital that had been using a single prime broker to access global markets. Recently, the fund decided to start trading in derivatives, forex and warrants, none of which were part of its current prime broker offering. However, working with multiple prime brokers requires trading on multiple screens, something they did not want to do. The solution, Carre relates, was to sign up with GL Fast, which aggregates access to multiple prime brokers via a single screen and, in turn, provides access to a wide range of asset classes on multiple markets.
Carre notes that installation of the GL Fast service is not overly time-consuming. "Because it's a service provided in an ASP [application service provider] format, it's very easy to download and then start trading 24 hours later," he claims.
Fidessa Offers Royal Service
With its Fidessa workstation, Royalblue also aims to garner the attention of U.S.-based traders. The platform's multi-asset support allows for the simultaneous trading of cash, futures, options and other asset classes on upwards of 50 exchanges and liquidity pools, according to the company. The Fidessa service - which provides trading systems, market data and a connectivity network that links to nearly 100 brokers worldwide - began targeting U.S. buy-side traders with a new workstation and ASP product in March.
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