Download - Liquidity Panel CADC – August 18, 2005
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Liquidity PanelCADC – August 18, 2005
Joseph P. PerryManaging MemberRedSky Financial, LLCSpeed Trading Partners, LLC
“The Relationship Between a Broker/Dealer and Proprietary Trading
Groups”
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• Proprietary trading group founded in 2000• Initially traded equities and equity options
but quickly moved into futures• Employed black box type strategies
including arbitrage and hedging • Wrote to a system’s API for programmed
order routing and then used that system’s front-end for order management
Speed Trading Partners
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• Minimizing market data and order routing latencies
• Minimizing costs• Accessing multiple asset classes• Directly accessing exchange matching
engines
Challenges for Speed Trading Partners
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• Created Broker/Dealer and FCM in 2001– Achieved cost savings
• Lowered clearing fees• Lowered execution fees
– Joined exchanges thereby gaining direct market access• Improved system’s performance
RedSky Financial
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• Built own technology– Additional streams of revenue
• Flexible clearing solutions– Currently interface with the clearing
systems of 6 global clearers and 4 domestic-oriented clearing firms
RedSky Financial
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• Proprietary trading platform - R3– Provides direct market access to multiple
asset classes– Offers a FIX API and a proprietary API– Supports special order types such as
VWAP, reserve (hidden quantity) and pegging
– Seamlessly integrates with leading third-party software vendors
RedSky Technology
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• Stocks– ARCA – AMEX– INET– NYSE– NYFIX– BRUT– NASDA
Q– BTRD– TRAC
• FX– espeed– HOTSPO
T– EBS**
• Futures – GLOBE
X– ECBOT– XEUS– ONE– CFE– EUREX– LIFFE– MX– IPE**
• Options – BOX– ISE– CBOE– AMEX– PHLX– PSE
• Bonds – espeed– BTEC
RedSky Market AccessAccess to 24 exchanges/ECNs
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• Hedge Funds• Institutions• Proprietary Trading Groups (liquidity
providers)• Professional Traders• Family Offices
RedSky Clients
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• Facilitate clients’ trading – Continuously improve software – Establish additional clearing
relationships – Join additional exchanges
• Compliance • Risk Management
Role of RedSky
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• Establishing a clear distinction between B/D and proprietary trading group (client)– No selling or internalization of order flow– Orders sent directly to exchanges/ECNs
• Technology– Maintaining existing infrastructure– Creating new infrastructure
• Pricing (costs)– Negotiating rates
Challenges for RedSky
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• Identifying new trading opportunities• Creating profitable trading strategies and
algorithms• Driving direction of technology
development for the broker/dealer
Role of Proprietary Trading Groups
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• Risk Management• Costs
– Commissions
• Technology
Challenges for Proprietary Trading Groups
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The successes of both a broker/dealer that provides technology and a
proprietary trading group are very much tied to each other.
Conclusion