Sometimes it can be a trading traffic jam for the $2.5 trillion dollar wrap account industry.
There are a multitude of trading systems, with accounts and advisors all trying to communicate wrap trades and efficiently operate their business. With the Archer platform from Market Street Advisors aligned with Cowen & Co.’s wrap trading system (see Cowen Story), all the various components of the wrap trading business are coming under a single point of entry.
The buyside wants a one-stop, front-end solution to communicate their wrap retail orders similar to the larger institutional orders and not sacrifice time and efficiency. If an institutional order takes minimal time to execute and report, then the buyside wants that same speed and performance for its retail wrap orders.
In wrap trades, asset managers typically would use each broker’s wrap platform one-on-one, each with its own trading systems and technology. Today, the system is complex and labor intensive and is inefficient. Enter MSA’s Archer, which aggregates all these trading, regulatory reporting and communications functions into one system, according to Bryan Dori, president and chief operating officer of MSA.
"Archer is a single point of entry where you can manage all wrap accounts, regardless of platform use, in one fell swoop," Dori said. "This helps brokers and buyside traders manage and automate the trade communication process."
Here’s how it works. Archer creates an order based on multiple investment advisors’ orders, creating one block order. The block order is delivered from the buyside’s own order management system to the executing broker, such as UBS, Morgan Stanley or Deutsche Bank. Archer informs the sponsor or advisor what the status of an order is – from delivery to the broker to completion. Archer then allocates and distributes the block back to all the separate accounts.
Nicole Tarallo managing director of Clearbridge Advisors and head of Legg Mason Private Portfolio Group, an MSA client said, "Archer’s ability to streamline trade creation and integrate to our existing OMS is a huge help in our trading process. Our ability to block orders for multiple sponsor programs in one place for step-out trading gives us the scale we need to be successful in the retail channel,"
A managed "wrap" account is an investment account held by an individual investor. It is run by a professional money manager. In contrast to mutual funds, which are professionally managed for a herd of investors, managed accounts are tailored investment plans designed to meet a specific investor’s needs.
"The bottom line is that Archer allows the buyside to integrate into it any existing OMS tool they use" Dori said. He added, as trading margins have become slimmer, this gives managers the ability to save dollars and create efficiencies.
MSA’S Archer has connected with Cowen’s 360 wrap utility, powered by Liquiditybook, which handles the clearing and settlement portion of stepped out wrap trades. Cowen’s utility enables asset managers to execute with their best execution broker of choice, paying a commission, and eliminating sponsor rotation.
"Archer is the platform where the order is created and delivered to the executing broker," explained Mark Viani, managing director at Cowen’s electronic products group. "Once the order has been traded away from the sponsor for best execution, Archer then tells the sponsor an order has been executed and to be stepped out from Cowen."
Viani explained that Archer automatically notifies the sponsors that step-outs will be delivered from Cowen, rather than investment advisors creating the communication manually.
"The combination of Archer and 360 streamlines the entire managed account industry from order creations to best executions to step outs to the final settlements," Viani said.
