Royalblue Breaks Into Algorithmic Trading With BlueBox

Royalblue/Fidessa (booth 4106) is launching Fidessa BlueBox, an algorithmic trading system for sell-side firms seeking to offer their own automated trading strategies. The product, which is slated for release in the third quarter, is integrated into the company's Fidessa sell-side order management system (OMS).

According to Martin Hakker, EVP of marketing, Fidessa BlueBox responds to customers' desires for a more cost-effective solution that offers more control and flexibility when interacting with the algorithms. Rather than rely on algorithms developed by bulge-bracket firms that brokers may regard as competitors, Fidessa BlueBox allows brokers to internally host algorithms provided within the OMS, or build proprietary algorithms, Hakker adds.

A fully integrated, scalable algorithmic engine that offers industry-accepted strategies out of the box, BlueBox is divided into two sections, explains Kristin Fendelander, Fidessa's VP of marketing. The strategy section consists of a set of industry standard models - such as VWAP, random slice, implementation shortfall, arrival price and percentage of volume - to assist traders in meeting benchmarks. The second section, BlueBox Framework, is a development environment for the design of algorithmic trading models.

"We took a step back to understand the needs of an algorithmic developer to give them quicker time to market," says Matt Rowley, Fidessa's product manager for algorithmic trading. "Developers want to spend more time on their statistical analysis and [on] moving their algorithms into production, and not waste a lot of time having them build an architecture to do that."

BlueBox provides more transparency than other algorithms, Rowley adds. "With the external third-party algorithms, the rules are locked down," he asserts. "[Brokers] don't know what the rules are."

In addition, Hakker notes, smaller brokers are looking for a more cost-effective solution. Many OMS vendors that provide access to the brokers' algorithms, he says, charge connectivity fees or per-share transaction fees on top of the brokers' commissions. Hakker says that Fidessa will charge a flat monthly fee for BlueBox, though he declines to disclose the amount.

"We're relieving the firms' reliance on competing brokers for algorithms," says Fendelander. "And it reduces the cost on a per-share basis."

Sang Lee, managing partner at Aite Group, sees the move into algorithms as an attempt by Fidessa to leverage its existing OMS capabilities. "The real sales pitch for Fidessa is they're able to provide everything from order management to execution management to [direct market access]," he observes. To them, algorithmic trading is a piece they were missing."

However, Lee notes, algorithmic trading platforms already are available from execution platforms, such as Portware and FlexTrade, that have connections to all the algorithms from the bulge-bracket firms. "Also, they have their own prebuilt algorithms, plus the clients could build their algorithms on their platform," he says. In addition, "Most firms are connected to all these CSFB and Goldman Sachs algorithms. I'm not sure how much you get switching over to a Fidessa."

While acknowledging that many firms have entered the algorithmic space recently, Hakker says BlueBox's flexibility offers an advantage over these other players. Since BlueBox Framework is fully integrated into the OMS, for example, developers can leverage market data, tick data or the compliance rules already in the Fidessa OMS, he says.

Because Fidessa provides rich functionality, "[Brokers] don't have to spend millions of dollars building an infrastructure," Hakker continues. He points out that some of the potential clients are midsize firms that are hiring algorithm developers.

Fidessa BlueBox will provide these developers with a quicker time to market, notes Fendelander. "The API eliminates the need for the developer to understand the Fidessa infrastructure," she says. The offering also includes smart wizards that automatically generate code and a dynamic interface for on-the-fly deployment of new and enhanced models, she adds.

More from the floor of the SIA Show 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