We will guide you through what to consider, to help you start the right conversations and make an informed decision.
You can read the guide here or download a copy to read later.
> Where to start
> What to look for in a trading system
> Buyer’s checklist
> 1. Connectivity
> 2. Reference data management
> 3. Regulatory reporting
> 4. Risk management
Before you even begin to assess the technology and options available, consider how you will approach the change - do you want a ‘big bang’ change, or would you prefer a staged roll-out?
There are pros and cons to each. Business continuity could be affected by a ‘big bang’ approach if post-implementation fixes are needed to smooth things out. On the other hand, a staged roll-out can mean using your legacy and new systems in parallel for a little while, which can be costly and you’ll need to consider any impact on your clients.
The best approach for your business will be dependent on your team structure, architecture, business focus and appetite for risk - all things that your technology partner should discuss with you.
FIX connections, regional changes and memberships to exchanges should also be part of the decision-making process. No matter what approach you take, ensure that all dependencies, whether internal or external, are identified, considered and discussed with your technology partner, and the desired outcomes agreed from the outset to avoid any dreaded scope creep.
Start by asking your technology partner or providers about the connectivity that their solution provides. With more sell-side firms expanding their trading business into new markets and exchanges, and the need to meet greater demand from clients for FIX connectivity, it’s a significant part of any trading system.
Thanks to MiFID II’s introduction of the requirement to disclose the legal entity identifier (LEI) for each underlying investor entity and demand from clients to change their fee structures, the ability to provide sufficient reference data cost-efficiently is a critical aspect of any new trading solution.
Already mandated in Europe, the landscape for regulatory reporting of trades and transactions continues to be critical, you’ll want to make sure the functionality to produce the necessary reports is built into the system.
With risk management of continued focus for sell-side firms and risk departments expecting ever more timely and granular data on trades, a trading system must be able to provide risk departments with better access to and visibility of trading activity. This must also include the functionality to allow risk parameters to be defined for automated trading decisions and risk calculations made, as well as the ability to include any number of external data fields.
Order management is one of the most functionally-dense areas of a trading system and the one you’ll probably use most. It’s important to make sure the user-interface - the way it looks and works - is user-friendly.
The ability to calculate and display intraday P&L is an increasingly desirable capability for sell-side front offices as margins tighten, so any system must be able to capture all relevant details.
Check your technology partner’s ability to provide market data. Some provide their own, others don’t but can provide it to the system via an API from an external source.
Post trade / middle-office
Most users now expect post-trade/middle-office functionality from their trading system to help deal with and automate regulatory reporting, removing the need for separate systems and processes.
Infrastructure & architecture
Finally, there’s the technology partner’s infrastructure & architecture to consider. Client support, development, latency and service levels have all become major factors in a firm’s decision-making process.
Whether you are considering a bespoke or 'out of the box' solution, having the opportunity to configure a trading system to meet the way you work will mean you get more value from your investment, because you won’t be paying for functionality that doesn’t support you in the right way.
For faster, smarter trading, market data and connectivity for institutional traders, including remarkably versatile order management software, contact us.