FlexTrade: Best Buy-Side Algorithmic / DMA Product

Waters Technology Awards

Trying to pinpoint the best algorithmic or direct market access (DMA) provider to the buy side is a lot like picking among multiple choice answers on a law school entrance exam: Almost all of them seem right, depending on your line of argument, but only one can be best among them. Indeed, in the past three years the judges have chosen a different winner each time, and have continued that trend in 2014 by picking FlexTrade and its FlexTrader execution management system (EMS) for the award.

Covering equities, foreign exchange (FX), and listed derivatives, the broker-neutral EMS has come along way since FlexTrade’s founding in 1996. Because alpha is difficult to discover in today’s markets, FlexTrader’s access to 200 trading venues and 20 dark pools allows firms to take advantage of a variety of arbitrage strategies varying in thrust and complexity, from convertible arbitrage, index arbitrage, and exchange-traded fund (ETF) arbitrage, to cross-border arbitrage—with the ability to hedge FX exposure automatically—and risk arbitrage via its pairs-trading module.

Customizable algorithmic tools likewise include volume-weighted average price (VWAP), percentage volume, time slice, cross currency multi-asset spread, basket trading, and inline, which can be used separately or dropped into a trader’s larger strategy—such as dollar-neutral or sector-neutral—to manage portfolio characteristics, risk, or cash constraints.

Though well-known for these tools, as well as its transaction-cost analysis (TCA) and white-labeling agreements, deeper partnerships have headlined FlexTrade’s activities in the past year. In May, FlexTrade announced the EMS would be pulled into Thomson Reuters’ influential buy-side Eikon platform. It also completed a significant integration with OneMarketData’s OneTick analytics—a recent Buy-Side Technology Award winner—that links a dedicated complex-event processing (CEP) engine directly to FlexTrader’s system. The combined offering gives users the ability to generate superior trade alerts and signals that can mean the difference between catching a fleeting opportunity and missing out altogether.

The work the provider is doing on all these fronts portends a future for this category that goes beyond the mythical black box or an algorithm that can produce a little bit of temporary magic, which is now, frankly, standard fare. Yes, the judges have proven fickle over the years—but based on FlexTrade’s recent evidence, there’s no reason to believe that it can’t buck the trend and repeat this year’s success, particularly as its bread-and-butter market, FX, gets set for potentially significant infrastructural change.