CONNECTING THE DOTS.

Philippe Buhannic, founder and chief executive officer of TradingScreen explains how the firm has and is plugging the execution gaps.

Q. What is the history of company and its products?

A. I had the idea for the company while I was working at Credit Suisse First Boston. My team and I developed a product called PrimeTrade (an internet-based order-routing and execution system), PrimeClear (a trade-clearing system), and PrimeRisk (a risk management system). It dominated the market, but I realised that clients did not just want a single dealer system that traded one asset class. I also realised that most of the products were geared towards the sellside and that the buyside was being left behind. We launched the company in New York in 1999 and then opened an office in London, and Japan the year later to offer cross border trading in the US, Asia and Europe. Our first product was an execution management system that was multi-broker and multi-asset for the alternative asset manager.

Today we are one of the largest EMS providers with 180 people in 12 offices, 1,700 buyside clients and 6,000 daily users. We are unique in that most of the systems today are single asset class. Breaking it down, about 45% of our clients are hedge funds with the rest being mutual funds, wealth managers, private banks as well as broker dealers.

Q. I see you just won Financial News’ award for best buyside trading solutions – how does the firm keep its competitive edge?

A. We have created one of the most complete trader workstations and now address every point in the trader’s workflow. For both the buy- and sellside, our products help them connect to each other, improve market access, reduce connectivity costs, increase trading efficiency and fully automate their workflow. We also carefully and continually analyse the workflow of our clients and make sure that we continually are meeting their needs. If we stood still we would not be here.

Q. Can you discuss your products – Prime, EMS and Plus?

A. It has taken us three years but we now address the entire workflow. Trade EMS is for the traditional asset manager while TradePlus is dedicated to the broker dealer community. Our most recent product is TradePrime which is targeted at the alternative manager. We call it a “hedge fund in the box” in that it combines EMS and OMS functions along with risk and connectivity tools. This helps resolve one of the most difficult challenges the alternative asset manager faced – the complexity of integrating the trading-focused EMS, the position- and performance-focused OMS, and the administrator information into a seamless, intuitive workflow. Another advantage is the time it takes to implement the system. They can download the software, enter some parameters and connect within an hour. In the past, to get an EMS operational, you would have needed up to 18 months.

Q. What has been the impact of regulation such as EMIR and MiFID on the industry?

A. There will be multiple effects and it is difficult to assess the full impact while they are still being negotiated. There are so many uncertainties at the moment but there are a few things that will definitely happen. For example, there will be more venues being introduced for different asset classes and this will create a certain amount of complexity. The buyside may also have more difficulty in trading large orders because of the fragmentation of liquidity. There is though some good news in that the new rules will create more competition in not just execution but also in clearing and that should reduce costs.

Q. Can you provide more detail about the international side of the business such as your recent deal with Chi -X Australia?

A. Overall, we are leveraging our experience in the US, Europe and Japan to other parts of Asia, as new execution venues are being launched. We have made huge inroads into India and Thailand as well as Hong Kong which has a large asset management community. There is a greater understanding now about the importance of technology and that best practices need to be applied. Australia is different though in that it has a fairly large international trading community but the country is undergoing a revolution in terms of technology. It was not too long ago that people did not know what low latency was.

Our liquidity and multi-venue environment services provides a combined picture of stock liquidity of local equities jointly listed on the Australian Securities Exchange (ASX) and new venue Chi-X Australia which was launched on 31 October 2011. It allows the buyside to have a single view that includes table and graphical stock prices across both marketplaces, time and sales and tick-by-tick capability, drag-and-drop order management, a trading velocity index as well as connectivity to any other exchange where those securities trade around the globe.

Q. What is the driver behind the collaboration with Bank of America Merrill Lynch, Citi, and Nomura on a transaction cost analysis consultation paper?

A. It is in response to our buyside clients’ concerns over transaction cost analysis and the conflicts of interest that exist in the brokerage community when a broker offers a TCA service. It is hard for the buyside to identify the strong from the weak performers because there are no clear industry-accepted standards for measuring transaction costs. Open TCA aims to bring together buy- and sellside firms to set clear standards for measurement, so there is a common process and tools for analysing those costs fairly, without bias. We issued a consultation paper that looks at how we can establish a common benchmark methodology.

Q. What are the future challenges and opportunities?

A. There are so many things happening at the present moment but one of the biggest changes that we will see is the redrawing of the investment banking business model due to regulation and market conditions. Also, clients increasingly want simplicity and the ability to execute all asset classes whether it is futures, fixed income, commodities, ETFs, structured products or equities across different regions through one pipeline. I think that is one of the biggest challenges but also for us one of our greatest opportunities is to be able to meet these demands with new services and products.