In recent years, outsourced trading desks have become a growing trend in the funds industry, providing hedge fund managers with an alternative to traditional in-house trading desks. Outsourced trading solutions offer numerous benefits, such as cost savings, expertise, and greater flexibility. Companies like FundBank, FlexTrade, and Marex provide reliable and efficient outsourced trading services. Let’s look into this topic further.
Outsourced trading is offered by specialized firms, often for asset managers or hedge funds. These providers execute trades, offer market insights, and handle parts of the investment process on behalf of clients.
Key Takeaways:
- Outsourced trading desks are a growing trend in the funds industry.
- Outsourced trading offers cost savings, expertise, and flexibility.
- Companies like FundBank, FlexTrade, and Marex provide reliable services.
Who Provides Outsourced Trading
Outsourced trading has evolved into a strategic lifeline for asset managers, particularly in times of market upheaval. The flexibility it provides in terms of cost structure, regulatory compliance, and access to a broad liquidity pool positions it as a dynamic solution in the ever-changing financial landscape. Firms can leverage outsourced trading not only for cost savings but also as a means of staying agile, compliant, and competitive in an era of evolving market dynamics.
Outsourced trading has emerged as a valuable solution provided by prominent institutions. Notably, large investment banks and forward-thinking prime brokers, such as StoneX Prime Services, play a pivotal role in delivering outsourced trading services. Let’s look further into the key market players, shedding light on their offerings and presence.
BTIG: A Global Presence in Outsourced Trading
Location: San Francisco, CA
Established in 2004 through the merger of Bass Trading and Baypoint Trading, BTIG boasts 30 traders providing 24-hour coverage. With offices spanning New York, Dallas, San Francisco, London, Hong Kong, Sydney, and Singapore, they offer trade-execution services separate from prime brokerage. The strategic hire of Vincent Cutaia in 2019 reflects their commitment to expanding outreach among fund managers on the US West Coast.
Capital Institutional Services: Empowering Trades Across Asset Classes
Location: Dallas, TX
Offering global trading capabilities in Equities, Derivatives, and Fixed-Income securities, Capital Institutional Services supports clients throughout the entire trade lifecycle. Beyond execution, they provide research, post-trade compliance, commission management, and advisory services on outsourcing middle and back-office functions.
Celadon Financial Group: A “Mini Prime Broker” with Diverse Offerings
Location: Chatham, NJ
Known as a “mini prime broker,” Celadon Financial Group has been a stalwart in trade execution services for over 30 years. Their support extends to a wide range of strategies, including long/short equity, equity market neutral, high-frequency trading, volatility arbitrage, and a dedicated Options desk.
CF Global Trading: Customized Broker-Neutral Execution Services
Location: New York, NY
With a clientele encompassing hedge funds, traditional asset managers, and pension funds, CF Global Trading offers customized, broker-neutral execution services. Boasting a substantial network of 330+ counterparties and 50+ electronic exchange connections, they recently expanded into listed derivatives and fixed-income trading.
Cowen: Global Reach with a Diverse Client Base
Location: New York, NY
Serving over 175 investment managers globally, Cowen has a team of 34 traders supported by staff in key financial hubs. The global prime brokerage co-heads, Michael Rosen and Jack Seibald, oversee the US outsourced trading head. This positioning underscores Cowen’s commitment to providing comprehensive outsourced trading services.
Dalzell Trading: A Beacon of Conflict-Free Independence
Location: Boston, MA
Positioning itself as a conflict-free independent entity, Dalzell Trading, founded in 2018 by Dave Dalzel, offers experienced traders relative to prime broker and bank competitors. Beyond transaction cost analysis, Dalzell Trading provides simple fee structures and free advice on best execution policies, catering to clients like Disciplined Alpha.
Jefferies Group: Growing Outsourced Trading Unit with Global Presence
Location: New York, NY
With nine traders across NYC and London, Jefferies Group established its outsourced trading unit in June 2018. Experiencing significant growth, they added over 100 clients, half of which are emerging managers. Jefferies clients benefit from access to the firm’s research and the ongoing expansion of their trading capabilities.
Jones Trading: Expansive Client Base and Geographic Coverage
Location: Westlake Village, CA
Jones Trading boasts a client base exceeding 75, with traders covering U.S. markets, Asia, and Europe. Founded in 2015, the firm has expanded its desks to major financial hubs, including Boston, Chicago, Dallas, London, Los Angeles, New York, San Francisco, and Westlake Village, CA.
Meraki Advisors: Trading Expertise with Global Footprint
Location: Park City, UT
Launched in May 2019 by former Goldman Sachs trader Arnold, Meraki Advisors caters to hedge funds, private equity funds, family offices, and other asset managers. Their trading expertise spans global equities, credit, and foreign exchange, with plans for office openings in New York and Hong Kong in Q4 2020.
Northern Trust: A London-Based Outsourced Trading Unit
Location: London, UK
Establishing its outsourced trading unit in September 2017 post the acquisition of Aviate Global, Northern Trust serves 60 clients, including long-only shops and hedge fund managers like Lucerne Capital. In addition to execution services, they collaborate with clients’ middle offices for trade matching and settlement coordination, emphasizing flexibility with custodians.
Key Components of Outsourced Trading
Understanding the key components of outsourced trading is essential for firms seeking strategic partnerships to navigate the complex financial landscape. Each component plays a pivotal role in shaping the effectiveness and efficiency of outsourced trading arrangements, offering firms a comprehensive solution to their trading needs.
Global Market Reach
A fundamental aspect of outsourced trading is the expansive global market reach that partnering firms gain access to. This component ensures that firms can tap into diverse markets, harnessing opportunities on a global scale. For instance, collaborations with entities like CF Global Trading provide a network spanning New York, London, and Hong Kong, enabling clients to execute trades across major financial hubs seamlessly.
Defined Corporate Structure
The success of outsourced trading hinges on a well-defined corporate structure that delineates roles and responsibilities. This clarity is exemplified by institutions such as Capital Institutional Services, where the entire trade lifecycle is meticulously managed. The defined structure ensures effective communication and coordination between the outsourcing firm and the service provider, fostering a collaborative environment.
Research Capabilities
Robust research capabilities are a cornerstone of effective outsourced trading. Firms benefit from the expertise and insights of their outsourcing partner to make informed decisions. Celadon Financial Group, known as a “mini prime broker,” exemplifies this component, offering 30+ years of trade execution services backed by extensive research capabilities catering to family offices and institutional investors.
Execution Capabilities and Trading Tools
At the heart of outsourced trading lies the ability to execute trades with precision. Entities like Jones Trading, with 15 traders covering U.S. markets and dedicated Derivatives traders, showcase exemplary execution capabilities. These firms provide clients with access to cutting-edge trading tools, empowering them to navigate markets effectively and execute transactions seamlessly.
Conflict of Interest Capability
Maintaining integrity and transparency is paramount in outsourced trading. Firms seek partners with robust conflict of interest capabilities to ensure ethical conduct. Dalzell Trading positions itself as a conflict-free independent entity, offering experienced traders and straightforward fee structures, mitigating potential conflicts and fostering trust with clients like Disciplined Alpha.
Anonymity vs. Attribution Capability:
Outsourced trading offers flexibility in managing anonymity or attribution based on strategic preferences. BTIG, with locations across the globe, caters to diverse strategies and preferences. Whether firms choose to operate discreetly or with attribution, this component allows for tailored approaches, balancing the need for transparency and confidentiality.
Extensive Broker Networks
A significant advantage of outsourced trading is the extensive broker networks that firms can leverage. CF Global Trading, with 330+ counterparties and 50+ electronic exchange connections, exemplifies this component. A broad network ensures that firms can choose from a diverse pool of brokers, optimizing trading conditions and enhancing the efficiency of trade execution.
Commission Sharing Agreements
Collaborative partnerships often involve commission sharing agreements, aligning the interests of both parties. Cowen, serving over 175 investment managers globally, exemplifies this with a collaborative approach. Such agreements ensure that success is mutually beneficial, creating a symbiotic relationship where both the outsourcing firm and the service provider have a vested interest in achieving optimal outcomes.
In conclusion, these key components collectively shape the landscape of outsourced trading, offering firms a holistic solution that goes beyond mere execution to encompass research, strategic collaboration, and global market access. As the financial landscape continues to evolve, understanding and leveraging these components becomes imperative for those looking to thrive in the dynamic world of outsourced trading.
Outsourced Trading Benefits
Outsourced trading desks offer a range of benefits to hedge fund managers and financial institutions. One of the key advantages is cost savings. By outsourcing their trading activities, companies can avoid the expenses associated with hiring and training in-house traders, as well as the ongoing costs of maintaining trading infrastructure. This allows them to allocate their resources more efficiently and focus on their core business activities.
Improved Insights and Adaptability
Another significant benefit of outsourced trading is access to expertise. Outsourcing providers like FundBank, FlexTrade, and Marex employ experienced traders who have a deep understanding of the markets. These experts can provide valuable insights and analysis, helping managers make informed decisions and improving trade execution quality. By relying on outsourced trading experts, companies can reduce the risk of errors and enhance their overall trading performance.
Furthermore, outsourced trading desks offer greater flexibility to hedge fund managers. Instead of maintaining a full-time in-house trading desk, managers can access outsourced trading services on an as-needed basis. This allows them to scale their trading operations according to market conditions and reduces overhead costs. With reliable and efficient outsourced trading partners like FundBank, FlexTrade, and Marex, managers can rely on support whenever required, ensuring seamless trading operations.
| Benefits of Outsourced Trading | Summary |
|---|---|
| Cost savings | Companies can avoid hiring and training costs, as well as expenses for trading infrastructure. |
| Access to expertise | Experienced traders provide valuable insights, improving trade execution quality. |
| Greater flexibility | Managers can scale their trading operations as needed, reducing overhead costs. |
| Reliable outsourced trading | Working with trusted providers ensures efficient and expert support. |
In conclusion, outsourced trading offers several advantages to hedge fund managers and financial institutions. It provides cost savings, access to expertise, and greater flexibility in trading operations. By partnering with reputable outsourcing providers like FundBank, FlexTrade, and Marex, companies can leverage efficient and reliable outsourced trading support. These experts help optimize trading goals and allow managers to focus on their core business activities. Outsourced trading is a viable solution for companies looking to streamline their trading operations and enhance their overall performance.
Outsourced Trading Solutions Offered by Leading Providers
Leading providers in the outsourced trading industry, such as FundBank, FlexTrade, and Marex, offer a wide array of comprehensive solutions tailored to the specific needs of their clients. These reputable outsourced trading providers understand the unique challenges faced by financial institutions and hedge funds in today’s dynamic market environment. They leverage their expertise and cutting-edge technology to deliver efficient and reliable outsourced trading options.
The Range of Services Offered
Outsourced trading providers offer a range of services, including:
- Outsourced Trading Platform: These providers offer sophisticated and user-friendly trading platforms that allow clients to execute trades seamlessly. The platforms are equipped with advanced features, real-time market data, and analytical tools to support informed decision-making.
- Outsourced Trading Support: The dedicated support teams of these providers ensure smooth operations throughout the trading process. They offer assistance in trade execution, trade settlement, and reconciliations, providing clients with peace of mind.
- Outsourced Trading Consultants: Reputable providers also offer consulting services to help clients optimize their trading strategies and enhance overall performance. These consultants have in-depth market knowledge and can provide valuable insights to improve trading outcomes.
Customized Solutions for Financial Institutions and Hedge Funds
Leading outsourced trading providers understand that the needs of financial institutions and hedge funds differ. They tailor their solutions accordingly to meet the specific requirements of each client.
| Outsourced Trading for Financial Institutions | Outsourced Trading for Hedge Funds |
|---|---|
| Financial institutions require robust trading solutions to manage large volumes of trades across various asset classes. Outsourced trading providers offer scalable platforms and deep market expertise to handle complex trading activities. | Hedge funds often have specific trading strategies and require flexible solutions to execute their trades efficiently. Outsourced trading providers cater to these unique requirements, offering customized platforms and access to experienced traders. |
By partnering with professional outsourced trading providers like FundBank, FlexTrade, and Marex, financial institutions and hedge funds can leverage their expertise and technology to optimize their trading operations. These reputable providers offer efficient trading support, reliable platforms, and expert guidance for optimal trading outcomes.
Conclusion
Outsourced trading has become an efficient and cost-effective solution for hedge fund managers and other financial institutions. By partnering with reputable outsourcing providers like FundBank, FlexTrade, and Marex, companies can access expert trading support, reliable platforms, and tailored solutions. The benefits of outsourced trading include cost savings, access to expertise, and greater flexibility in trading operations.
With their extensive experience and industry knowledge, these providers offer efficient and reliable outsourced trading options, enabling clients to optimize their trading goals and focus on core business activities. Whether it’s trading consulting or trading support services, these efficient outsourced trading companies possess the necessary expertise to meet the specific needs of their clients.
By leveraging the outsourced trading expertise of these reputable providers, hedge fund managers and financial institutions can achieve maximum efficiency and effectiveness in their trading operations. With their proven track record and commitment to delivering high-quality services, FundBank, FlexTrade, and Marex are trusted partners in the outsourced trading industry.
FAQ
Who are the leading providers of outsourced trading services?
The leading providers of outsourced trading services include FundBank, FlexTrade, and Marex.
What are the benefits of outsourced trading?
Outsourced trading offers cost savings, access to expertise, and greater flexibility in trading operations.
What solutions do leading providers offer for outsourced trading?
Leading providers offer outsourced trading platforms, professional outsourced traders, and consulting services tailored to the specific needs of their clients.
Who can benefit from outsourced trading services?
Outsourced trading services cater to a wide range of clients, including financial institutions and hedge funds.
How can reputable outsourced trading providers help optimize trading goals?
Reputable outsourced trading providers like FundBank, FlexTrade, and Marex offer efficient and reliable outsourced trading options, enabling clients to optimize their trading goals and focus on core business activities.
