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Liquidity Panel CADC – August 18, 2005. “The Relationship Between a Broker/Dealer and Proprietary Trading Groups”. Joseph P. Perry Managing Member RedSky Financial, LLC Speed Trading Partners, LLC. Speed Trading Partners. Proprietary trading group founded in 2000

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Presentation Transcript
slide1

Liquidity Panel

CADC – August 18, 2005

“The Relationship Between a Broker/Dealer and Proprietary Trading Groups”

Joseph P. Perry

Managing Member

RedSky Financial, LLC

Speed Trading Partners, LLC

speed trading partners
Speed Trading Partners
  • Proprietary trading group founded in 2000
  • Initially traded equities and equity options but quickly moved into futures
  • Employed black box type strategies including arbitrage and hedging
  • Wrote to a system’s API for programmed order routing and then used that system’s front-end for order management
challenges for speed trading partners
Challenges for Speed Trading Partners
  • Minimizing market data and order routing latencies
  • Minimizing costs
  • Accessing multiple asset classes
  • Directly accessing exchange matching engines
redsky financial
RedSky Financial
  • Created Broker/Dealer and FCM in 2001
    • Achieved cost savings
      • Lowered clearing fees
      • Lowered execution fees
    • Joined exchanges thereby gaining direct market access
      • Improved system’s performance
redsky financial1
RedSky Financial
  • Built own technology
    • Additional streams of revenue
  • Flexible clearing solutions
    • Currently interface with the clearing systems of 6 global clearers and 4 domestic-oriented clearing firms
slide6

RedSky Technology

  • Proprietary trading platform - R3
    • Provides direct market access to multiple asset classes
    • Offers a FIX API and a proprietary API
    • Supports special order types such as VWAP, reserve (hidden quantity) and pegging
    • Seamlessly integrates with leading third-party software vendors
slide7

RedSky Market Access

Access to 24 exchanges/ECNs

  • Stocks
    • ARCA
    • AMEX
    • INET
    • NYSE
    • NYFIX
    • BRUT
    • NASDAQ
    • BTRD
    • TRAC
  • Futures
    • GLOBEX
    • ECBOT
    • XEUS
    • ONE
    • CFE
    • EUREX
    • LIFFE
    • MX
    • IPE**
  • Options
    • BOX
    • ISE
    • CBOE
    • AMEX
    • PHLX
    • PSE
  • Bonds
    • espeed
    • BTEC
  • FX
    • espeed
    • HOTSPOT
    • EBS**
slide8

RedSky Clients

  • Hedge Funds
  • Institutions
  • Proprietary Trading Groups (liquidity providers)
  • Professional Traders
  • Family Offices
slide9

Role of RedSky

  • Facilitate clients’ trading
    • Continuously improve software
    • Establish additional clearing relationships
    • Join additional exchanges
  • Compliance
  • Risk Management
slide10

Challenges for RedSky

  • Establishing a clear distinction between B/D and proprietary trading group (client)
    • No selling or internalization of order flow
    • Orders sent directly to exchanges/ECNs
  • Technology
    • Maintaining existing infrastructure
    • Creating new infrastructure
  • Pricing (costs)
    • Negotiating rates
role of proprietary trading groups
Role of Proprietary Trading Groups
  • Identifying new trading opportunities
  • Creating profitable trading strategies and algorithms
  • Driving direction of technology development for the broker/dealer
challenges for proprietary trading groups
Challenges for Proprietary Trading Groups
  • Risk Management
  • Costs
    • Commissions
  • Technology
slide13

Conclusion

The successes of both a broker/dealer

that provides technology and a

proprietary trading group

are very much tied to each other.