The driving force behind Robert W. Baird & Co. and Fox River Execution’s partnership was simple: They needed each other.
Last week, Baird signed an exclusive agreement to provide its clients with Fox River’s algorithmic trading strategies. For Baird, the deal gives the Milwaukee-based firm’s customers another way to pay for research, while offering a differentiated product.
For Fox River, the deal puts the firm’s algos on more desktops. The Geneva, Ill.-based firm is an execution-only shop that offers algorithms, but does not have a research product. The deal with Baird introduced Fox to a new group of money managers–those who use algorithmic trading to pay for their research.
Dan Renouard, chief operating officer of institutional equities at Baird, called the partnership a win-win. "We’ve married up the best of what each of us has to offer," he said. The deal was driven by clients, he added, as they did not want another white-labeled algo from a broker they already did business with. Clients wanted something different, he said.
Trade-cost analysis vendor Elkins/McSherry has rated Fox River as the top algo provider for the period from 2007 through 2009, according to a Fox River press release.
For Baird, the Fox River agreement fills a hole in its electronic trading offering. It now offers algorithmic trading to go along with its new program trading effort, which launched last summer. In January, the firm hired Emil Skulski to run program trading from Stamford, Conn. Skulski is a 20-year veteran with sellside experience, who spent most of his career at JPMorgan Asset Management.
And for Fox River, greater exposure translates into increased business, propelling the firm’s client base from its current level of just over 50. "We are looking to pick up new clients, and as a result of this partnership, already have," said Ron Santella, Fox River’s chief executive officer.
Renouard said the alliance with Fox River was based on several commonalities: Both firms are in the Midwest, neither has a proprietary trading desk nor prefers one dark pool over another, and both are employee-owned. "We are both Wall Street without being on Wall Street," Renouard said.
In the end, Renouard said, Baird simply didn’t want to make the investment of time, money or staffing to develop its own algorithmic trading platform. That become an easier decision after Baird began discussions with Fox River, he said. "The more we understood Fox River, the better we felt about this as the best path forward for Baird, our clients and Fox."
Fox’s strategies are programmed to mimic a buyside trader’s thought processes and knowledge to find the best price and sources of liquidity, Santella said. The software factors in traders’ reactions and judgments to future equity market conditions, rather basing trade decisions on historical data and events.
Baird sales traders will be responsible for selling the Fox River algos, along with their high-touch services, Renouard said.
