Pragma, an algorithm vendor to broker-dealers and statistical arbitrage hedge funds, has begun to court traditional asset managers.
Under a new initiative dubbed SAMBA, for Single-Access Multi-Broker Algorithms, the software shop is offering technology and support to buysiders newly wary of using their brokers’ tools.
“In the past six months, we’ve noticed an uptick in interest from traditional money managers who are aware of the conflicts of interest broker-dealers have when routing orders,” Pragma chief executive officer David Mechner said.
One key problem, Mechner explained, is the fee structure of exchanges and dark pools. They pay rebates for posting orders and charge a fee for orders that take liquidity. So, a broker may opt to rest an order rather than trade immediately. That way, it collects the rebate and avoids the take charge, even though the tactic may not be in the best interest of the client.
Under Samba, Pragma technology makes all trading decisions. The trades are done through the client’s broker via the his market-access technology, but Pragma’s algorithms and smart routing oversee the trade. Who gets the rebates or take charges is up to the buyside client.
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