Customer Success Story – A Leading Macro Hedge Fund

A Leading Macro Hedge Fund

A Customer Success Story

A Leading Hedge Fund uses FIX Flyer’s Managed FIX solutions for real-time no-touch STP and risk management for Futures, FX and derivatives.

Summary

A leading hedge fund has achieved real-time STP for non-equity products including futures, FX, bonds and swaps using cloud-based FIX services from FIX Flyer:

  • Hedge fund operations team uses single dashboard for monitoring STP which has dramatically reduced its daily operational effort booking trades and ensuring positions are accurate
  • Portfolio Managers and Traders get instant trade and position updates within their proprietary trading systems and no longer spend hours each day making sure their trades hit their blotters correctly and flow down to operations.  The fund has implemented a single trade feed for all non-equity trading venues including ECNs, ATS’s and broker platforms.
  • Using FIX Flyer’s Managed FIX service for electronic drop copies, the fund now has a single centralized platform for uniform STP for all non-equity trading venues that enables synchronized real-time positions from front to back office.

Background

This leading hedge fund has a broad mandate to trade in a variety of global markets and instruments and employs a multi-manager model in which many portfolio managers are responsible for a portion of the overall capital in the fund, and each is at liberty to take advantage of liquidity on the electronic trading venues that fits his or her trading strategies.

For Equity trading, the fund runs a centralized execution desk using a single OMS/EMS (order and execution management system) which includes access to liquidity in all relevant equity trading venues, as well as allocating trades to the correct profit center.  

Trading in the non-equity space is a complex problem domain. The fund’s multi-manager model led to a wide variety of electronic trading venues used by each portfolio manager.  For example, some portfolio managers trade futures on Bloomberg’s TradeBook, while other might use REDI, and Morgan Stanley’s Passport.  Some portfolio managers choose to trade FX on BARC FX while other prefer Citi Velocity.  Trading in Bonds, swaps and other derivatives was migrating to SEFs (Swap Execution Facilities such as Bloomberg’s BSEF,) as required by provisions of Dodd-Frank regulations.  This leading hedge fund connects to many more execution venues.

Why so many electronic venues?  Each venue may have liquidity in specific products or geographic regions, or offer incentives via executing or clearing brokers, and they make it easy for Portfolio Managers to ramp up trading as they provide no or low footprint web applications.  Regardless of the venue, the portfolio manager is required to book the trade within 15 minutes of execution which often required custom integration of a trade file from each venue or manually entering the trade.  After booking the trade, the middle office needed to confirm the trade and then follow up with the portfolio manager if there were any discrepancies.  Double keying of trades often led to hours of follow up, and all-too-frequently incorrect positions remained at end of day.

While the fund had a cutting-edge system in place for STP of all products which provides Operations with a single dashboard for all trade activity, the fund was dependent upon trade capture.  Only trades that were manually keyed in by traders, or loaded via a hodgepodge of files submitted to operations from various sources, were included in firm-wide positions.  This led to a lag between front and back office exposure views and time spent by the operations group (and traders) chasing down discrepancies.

Prior to implementing FIX flyer, the fund had no electronic execution interface for the more than 20 ECNs and trading networks used by their Portfolio Managers and Traders.  The landscape for electronic trading of FX, futures, and other derivatives is constantly evolving and traders continue to jump on any venue that would offer better liquidity for specific products.  Portfolio Managers were used to getting trades into their proprietary system or spreadsheet, but could not immediately re-capture or transmit trades to operations.

Solution

This hedge fund turned to FIX Flyer to implement industry standard FIX drop copies from these electronic venues.  FIX Flyer’s Managed FIX solutions and its existing trading network was an off-the-shelf solution that provided all the building blocks to create and manage the FIX sessions to each venue and provide the fund a trade execution feed using the fund’s preferred .NET interface (though it is now migrating to a similar MQ Series interface.)

Within a few months, the fund was able to adjust their internal business process to receive FIX drop copies from FIX Flyer and route them to their front office risk exposure system so that trades executed on the included venues instantly appear on the traders’ blotter after execution.  The portfolio manager could then immediately affirm trades and/or have them flow no-touch to operations, creating more efficiencies.

The hedge fund does not bear the burden of creating and maintaining FIX networks:

  • The Flyer Trading Network routes traffic to/from each venue over a secure network link
  • Flyer’s cloud-based managed FIX engine seamlessly handles and rationalizes different FIX versions and custom tags used by each venue
  • Flyer employs its own Daytona and Ignition products to monitor, streamline and certify FIX connections with venues
  • Flyers Managed FIX solution provides the fund a single trade feed using the fund’s preferred API
  • Flyer’s managed services provides real-time monitoring and support of the entire FIX infrastructure

The fund continues to add additional venues into the same drop copy infrastructure as needed with FIX Flyer handling the FIX Connection and certification of the FIX session with the venue.  FIX Flyer gives the fund a trade allocation solution for non-equity products that fits into their business process with more agility than a cross-asset OMS could have provided.

For More Information

FIX Flyer can be found at http://www.fixflyer.com

 

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