How Effective Is Your Trading Operation?

Efficient and effective trade order management is critical to your
firm’s profitability and competitive position. The elimination of trading
and compliance errors combined with increased trading effectiveness
are a few of the reasons that market leaders have deployed trading
technology. Despite all the advantages of trade order management
systems, only half of investment management firms with more than
$1 billion under management use a trade order management system.
To help your firm understand its state of trading effectiveness,
Cutter Associates, Inc. has developed a proven methodology to
measure the effectiveness of your trading operation.

  

 
 

Welcome to the inaugural
issue of The Cutter Edge,
a bimonthly publication that
provides commentary on
systems and operations issues
critical to investment managers.
We welcome your comments
and suggestions.

Upcoming editions include
commentary on risk manage-
ment systems, separate
account management, fixed
income analytic systems and
other current industry issues.

OCTOBER
The Technology Alliance™
Boston

   Topics:
   • Performance Measurement
      and Attribution Systems
   • Outsourcing

IT Budget Survey Findings
and Report

NOVEMBER
The Technology Council ™
New York and London

Update on Performance
Measurement and Attribution
Systems

DECEMBER
The Technology Council™
New York and London

   Topics:
   • Market Data
   • Security Master/Reference
     Data Systems
What Level Is Your Firm?

Level I

 Level II
• No trade order management
  system (TOMS)
• Manual trading processes
• Paper tickets
• No automated checks for
  compliance, client restrictions
• Slow implementation of
  trade ideas
• Little or no communication
  regarding trading status,
  ideas and strategy between
  traders and portfolio managers
• Traders are order fillers
• Traders do not initiate
  trade ideas
• No metrics on trading
  effectiveness or potential
  impact of trades
• No electronic connectivity
  to brokers, crosses, etc.

• Use TOMS
• Daily/nightly batch upload/
  download between accounting
  system and TOMS
• Manual intervention for
  passing trades from portfolio
  manager to trader
• Limited intergration between
  TOMS and other systems
• No electronic communications
  to brokers and banks
• No use of FIX
• Limited use of crosses
Level IV
Level III capability plus:
• Full integration between TOMS
  and other systems; STP
• Fast implementation of
  trading ideas
• Analytics of impact of trades
  and trading costs
  (break points, slippage)
• Trading performance
  monitors
• Real-time integration with news
  and market information
• Risk monitoring capabilities
• Extensive communications
  between traders and
  portfolio managers
• Traders can initiate trading ideas
Level III
Level II capability plus:
• Intraday uploads from TOMS
  to accounting system
• Integration between TOMS
  and other systems
• Receive IOIs electronically
• Use FIX
• Broker selection strategies
  in place
• Measure broker effectiveness
• Trading alerts
• Communication on trading
  status and strategies between
• Real-time pricing integrated
  with TOMS
 


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Cutter Associates, Inc. visit
www.cutterassociates.com



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