Call it getting all its algorithms in a row.
TradingScreen, a broker-neutral provider of liquidity, trading, and investment technology via the software as a service system, is now bringing multiple broker algorithms under a single roof for the buyside. By hosting the algorithms, TradingScreen along with its PairsHub system, has a helped the buyside unclutter its desktop by placing the algorithms in a single window that is easy for institutional traders to see, comprehend and use.
Two years in the making, according to TradingScreen chief executive Philippe Buhannic, PairsHub simplifies the execution process by providing the buyside trader with a simple, yet execution-rich trading experience, irrespective of the selected broker destination. By being broker-neutral, TradingScreen, has been able to enlist many of the bulge firms, such as Bank of America Merrill Lynch, Barclays, Credit Suisse, Instinet, Macquarie, Morgan Stanley, and UBS, and offer their algorithms?.
Buhannic told Traders that he offers algorithms for upwards of 500 broker-dealers in the U.S. and close to 1,000 brokers globally.
So how does he get all the brokers to offer their own proprietary algorithms on the PairsHub system? The answer, Buhannic said, lies in the current economics of the equities market. Commission spend remains around $10.3 billion currently, off the record highs of $13 billion seen in 2007 and 2008, thus many brokers’ technology groups have seen budgets shrink. With this reduction in available IT money, he said brokers are outsourcing such things as algorithm customization, modification and hosting and letting TradingScreen take over the work.
“The buyside trader wants a more user-friendly interface when it comes to their algorithms or they want to modify the broker’s algorithm presentation window on their computer,” Buhannic said, “and the brokers don’t have enough money to do these jobs for everyone. That’s where we step in.”
Given the myriad parameters and designs used by the broker-dealers, TradingScreen not only does customization work for the brokers, but it also seeks to normalize or standardize the different set-ups and bring some uniformity to hundreds of algos and systems.
“We try to adapt a broker’s algo into something a user can more easily adapt into his workflow,” Buhannic said. “We’ll build the front-end for the buysider but the algo still comes from the broker of his choice.”
In some cases, TradingScreen has taken an algorithms front-end desktop appearance and at the buysider’s request, made it look more like another broker’s. This normalization, Buhannic said, helps the buyside trader navigate his desktop easier and frees him up to trade – and trade quicker – thus helping him achieve best execution.
While PairsHub started by modifying more complex pairs trading algorithms, it has since expanded its normalization and customization into more traditional algorithms such as VWAP, TWAP and even some opportunistic algorithms.
“As the brokers are being asked to do more work with fewer resources, it has allowed us to work with both smaller and larger brokers alike,” Buhannic said. “IT is just too expensive for a lot of people these days.”
And that’s where TradingScreen has carved its niche. Buhannic admits that two or three years ago the brokers would never allow a firm like his to modify or alter their algorithm’s appearance. But now, things are different.
“We’re working with two brokers now where we are developing a tool box for users,” Buhannic said. “Brokers are finding it harder to change everything for all their clients – so we’re doing the work that they used to do. And they can focus on other things that require their attention.”
TradingScreen also anticipates the roll out of another four additional sellside counterparties’ pairs trading algorithms before the end of Q2 2014.
Besides working on algorithm presentation and standardization, TradingScreen also offers users its own broker-neutral combined order execution management system and trade cost analysis.
