DMA
Overview
DMA is the ability of a buy-side trading desk to route orders directly to an execution venue - be it an exchange, ECN or some other venue - without a sell-side trader's intervention. In 2006, about 30 to 35% of the buy-side equity trade in the US went through the DMA platforms.
The adoption of DMA at buy-side is on the rise from 12% of equity trade in US in 2000 to around 35% in 2006. Lowering trade cost and best execution are the key factors for buy-side to adopt DMA. Hedge funds, the largest customer segment for DMA, are particularly attracted by the anonymity it provides as orders directed through it bypass the sell-side trade desk and are directly executed at execution venues. For the sell-side, it is the reduction in trade support expense and the lowering of trade execution risks.
DMA, as an offering, is now seeing internationalization. The concept, which was predominantly prevalent in the US, is now growing world over. Regulatory requirements like MiFID will further increase the need for DMA. Traditionally, DMA has been offered for equity trading. However, now the scope also includes other asset classes like FI and derivatives. Value-added services like algorithmic trading are also being offered along with DMA by sell-side to create differentiation.
HCL Solution
HCL has built huge expertise in DMA through its engagement with the prime brokerage group of a leading Investment bank. HCL has been supporting the customer's equity trading DMA platform that sees over 4 million transactions daily and is witnessing huge growth.
HCL solution has provided several business benefits to customer:
- Meeting demanding service levels of customer's clients
- In new client adoption for the customer
- In ensuring speed of trade execution for the customer's clients
- In ensuring that the FIX connectivity from the clients or to the execution venues are always up and running with near zero latency
- Freeing up high-end resource pool for strategic work
- Immediate cost reduction to increase profitability from DMA business
HCL's domain expertise in institutional trading, exchanges and settlements area, has helped it offer services specific to DMA like:
- Development of interfaces supporting messaging protocols like FIX with multiple applications
- Monitoring, analysis and resolution of FIX connectivity issues to and from the Order Management System
- HCL has also leveraged its cross-trade lifecycle experience to put together a highly flexible algorithmic trading platform to tackle next-generation trading issues
- Focus on vector engines for high-performance computing, distributed Java spaces-based grids to allow for flexible streaming and distribution middleware
- 'Grid'-based compute engine allow easy modelling of finite difference, tree, finite element-based constructs.
- Marrying 'grid' or 'vector'-based compute engines with streaming semantics allow us get a combination of APl type high-performance computation, data retrieval and while operating at extreme low latency levels
- HCL has also looked to build as combination, a next-generation data hub viewing data management issues in high-frequency trading as critical as strategy execution
Rich experience in application development and maintenance, system integration, product implementation and application assurance services, backed by frameworks for algorithmic trading has helped us build end-to-end offerings around DMA and the upcoming Execution Management System space.
