Author: Faye Kilburn
Source: Inside Data | 24 Oct 2014
Categories: Data Display & Analytics | Data Delivery Technologies
Atlanta, Ga.-based decision support analytics provider Lucena Research is integrating direct trading capabilities from US brokerage firm Interactive Brokers into the vendor’s QuantDesk predictive analytics platform, to enable joint customers among registered investment advisors and portfolio managers to automatically place trades based on its predictive research.
Lucena currently provides three levels of delivery for its predictive research: a direct subscription to the platform itself; Alpha Vector Files that rank a firm’s stock universe from the most-predictive and highest-return to least-predictive and lowest-return for a specific timeframe; and model trading strategies that recommend portfolio trades that can be replicated by customers.
Presently, users can manually send Lucena’s trade recommendations-which apply to both trade and hold scenarios, and include suggested entry and exit points-to their brokers or custodians.
“Once we identify a promising investment strategy that our customers want to incorporate into their live trading, it used to require a somewhat manual process to incorporate the recommended transactions from our system into their order execution blotter. This is fine for clients who trade once a week, month or quarter. However, for a more actively managed account, this process can become laborious, and hence we are in the process of building direct integration with OMS and EMS systems in order to make the process smoother and more automatic,” says Lucena co-
founder and chief executive Erez Katz.
The first broker to be integrated into the QuantDesk platform will be Greenwich, Conn.-based Interactive Brokers, which will go live on the platform by year-end.
“Interactive Brokers has spent a lot of time building comprehensive APIs for third-party vendors to connect to their platform, and many of our customers have accounts with them, as they provide attractive leverage and low transaction costs. We found them to be most popular among the more active small and medium-sized hedge funds and investment advisors,” Katz says, adding that nevertheless, the vendor is “in the process of integrating with other order execution systems… driven primarily by customer demand.”
Lucena decided to automate the process in response to client demand for the ability to leverage the vendor’s predictive research without having to expand their own manpower or daily research tasks, which reflects a broader trend from customers for out-of-the-box trading strategies that provide immediate, actionable recommendations tailored to their specific accounts, he says. “Some of our customers feel compelled to ask our portfolio managers to drive trades for them.
They are still the account holder, but for a fraction of the cost compared to a traditional registered investment advisor, we can manage a portion of their assets in a sub-account managed by our portfolio manager and our machine learning-based algorithms,” Katz adds.
