Agency broker Instinet Inc. announced it added U.S. listed futures and options trading capability to the Newport 3 execution management system, a platform it says will enable users to better manage risk across asset classes.
The company says it developed the upgraded Newport 3 EMS by combining the technology it acquired in last year’s purchase of the options-focused firm TORC Financial with the futures trading technology it developed internally. And by adding futures and options trading functionality to Newport, Instinet is enabling users to craft customized, cross asset execution tactics, says Jon Zanoff, Instinet’s global head of EMS strategy.
“In Newport we’ve actually gone well beyond what the exchanges are doing in terms of single stock circuit breakers,” Zanoff explains. “And you can manage your risk across asset classes and if you overspend or over-raise money, you can be systematically taken out of the market.”
According to Zanoff, Newport 3 now includes constraints that can ease a client out of the market if they’ve exceeded their tolerance for risk. The new software boasts controls on how much a user is allowed to trade and maximum values that a firm or a trader is allowed to spend or raise in a single trading session. The system also aggregates those features across asset classes, he adds.
“What an EMS does, Newport excels at. It is an algorithmic tool kit. It allows customers to create their own proprietary, multi-legged execution strategies,” Zanoff says. “And to the extent that a client is executing these cross asset trading strategies, they can now all be done in one place.”
Frank Freitas, Instinet’s global head of product strategy, says the upgrades to the platform were driven by demand from asset managers and hedge funds, both of which make up a substantial portion of the firm’s client base. In talks with clients, the firm realized there was a strong appetite for a system that could conduct risk analysis and controls while boosting access to liquidity across a diverse and fragmented set of markets within the options sector.
“Hedge funds that are trading based on ideas they generated will find the low-latency direct market access element and the blanket access to all of the exchanges that options trade on in the U.S. highly attractive as offerings,” Freitas says. “Certainly the algorithmic suite is something that we expect them to adopt relatively more quickly than traditional asset managers.”
Unlike the cash equities market where price discovery is paramount, liquidity discovery is key within the options market, particularly if a trader is looking to trade in a block of contracts, Freitas says. “The EMS and smart router that’s aware of different eccentricities of the various exchanges, the algo suite that helps case orders based on order types … that whole suite of offerings as encapsulated within the EMS is what facilitates people getting better executions on their trades be it options, futures, or equities,” Freitas explains.
The launch comes on the heels of Instinet’s decision earlier this month to roll out a dark liquidity pool for U.S. listed options, a platform the company says is aimed at clients trading all order sizes and not just large blocks.
As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio