Direct Market Access (DMA)
Challenges we address
The adoption of DMA —which enables a trading desk to route orders directly to an execution venue — is on the rise, from 12% of equity trades in the U.S. in 2000 to around 35% in 2006. Lowering trade costs and improving execution are the key factors for the buy-side adoption of DMA. Hedge funds, the largest customer segment for DMA, are particularly attracted by the anonymity it provides. For the sell-side, the reduction in trade support expense and the lowering of trade execution risks are key factors in increased adoption.
DMA, which was prevalent mostly just in the U.S., is now growing the world over. Traditionally, DMA has been offered for equity trading. However, now the scope includes other asset classes such as FI and derivatives. Regulatory requirements like MiFID will further increase the need for DMA. And sell-side enterprises are differentiating themselves by offering value-added services like algorithmic trading along with DMA.
What you can expect
- Business benefits to customers
HCL has built expertise in DMA through its engagement with the prime brokerage group of a leading investment bank, for which HCL has been supporting an equity trading DMA platform that oversees over 4 million transactions a day.
HCL’s solution has provided several business benefits to this customer:
- Meeting the clients’ demanding service levels in the adoption of their new clients, ensuring speed of trade execution, and ensuring that the FIX connectivity is always up and running
- Freeing up a high-end resource pool for strategic work
- Immediate cost reduction to increase profitability from DMA business
- Specific DMA services
Backed by strong domain expertise in institutional trading and exchanges and settlements, HCL offers DMA-specific services such as:
- 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
- Leverage of HCL’s cross-trade lifecycle experience to put together a highly flexible algorithmic trading platform that tackles next-generation trading issues
- Focus on vector engines for high-performance computing and distributed Java spaces-based grids for flexible streaming and distribution middleware
- “Grid”-based compute engine that allows easy modeling of finite difference, tree, and finite element-based constructs
- Marrying “grid-“ or “vector”-based compute engines with streaming semantics, providing a combination of Apl-type high-performance computation and data retrieval while operating at low latency levels
- A next-generation data hub to view data management issues in high-frequency trading and strategy execution
Our rich experience in application development and maintenance, systems integration, and product implementation and application assurance services, backed by frameworks for algorithmic trading, has helped HCL build end-to-end offerings around DMA and in the up-and-coming execution management system space.