Wed, Jan 28, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Algorithmics warns proprietary trading desks face tougher future as standalones

Wednesday, May 25, 2011

Dr Andrew Aziz
Opalesque Industry Update - Algorithmics, a provider of risk solutions, said today that it was receiving increasing numbers of enquiries from proprietary trading desks that are being spun out from their bank owners as a result of the Volker Rule within the Dodd Frank Act. The Volker Rule prohibits banks from proprietary trading while also significantly restricting their ability to invest in a hedge fund or private equity vehicle.

Dr Andrew Aziz, Executive Vice President of Risk Solutions at Algorithmics, commented: “Due to its strong presence on both the buy and sell side, Algorithmics is uniquely placed to appreciate the issues that proprietary trading desks are likely to face as they set up risk processes on their own. These groups have long been accustomed to 100% asset class coverage for valuations and the luxury of significant IT support. As they establish themselves as standalone firms, we anticipate that the adjustment to ‘business as usual’ will be a challenge for many, especially if they want to replicate the level of support infrastructure they have been used to.”

Already the market is beginning to see proprietary trading desks being spun out of major banks and this trend will intensify as the July 2012 deadline imposed by the Dodd Frank Act approaches. This trend is occurring at just the same time as greater risk scrutiny is being demanded of hedge funds in general.

Dr Andrew Aziz continued: “As independent hedge funds, they face a number of challenges. First, they will be subject to more regulatory oversight than they have been used to as the hedge fund industry becomes subject to the new requirements of UCITS IV, AIFMD and Dodd Frank. Second, in addition to providing position-level reports to regulators, they will also face the growing demands of their investors for greater risk transparency. Finally, they will need to attract capital without a track record as independent funds. These are all fundamental requirements for entry into this market. In our view, if new funds can demonstrate that they have put in place best practice risk management then they will be in a stronger position to meet these regulatory and investor requirements and build credibility with potential investors.”

For further insight into the Dodd Frank Act, particularly the Volker Rule, please see the Algorithmics white paper ‘Dodd-Frank Wall Street Reform and Consumer Protection Act: Business Model Implications’: Source

For more information about Algorithmics’ solutions for the hedge fund industry, visit: Source

- FG

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - U.S. investors favor currency hedged Europe ETFs as euro tumbles, Quants win back investors as Swiss franc fuels volatility gains, David Einhorn's $7bn hedge fund is loading up on this stock, Hedge fund BlueMountain Capital unveils Ocwen Financial short, claims default on notes[more]

    U.S. investors favor currency hedged Europe ETFs as euro tumbles From Reuters.com: U.S. investors stung by the falling euro who want to stay invested in Europe are turning to exchange-traded funds designed to strip out the impact of the region's currency. The biggest among so-called "cur

  2. News Briefs - Millennials use tech tools to jump into investing, Winklevoss twins to launch bitcoin exchange with FDIC insured deposits, Robertson’s legacy from hedge funds to New Zealand, Real estate managers exploring smaller open-end funds[more]

    Millennials use tech tools to jump into investing It is the Facebookification of monetary investing. From social networking platforms that enable young investors to stick to every other's stock-picking mojo, to internet sites for initially-timers hungry for a piece of the Silicon Valley

  3. Comment - Why invest in hedge funds if they don't outperform the market?[more]

    From Forbes.com: Hedge funds have always been a bit exotic and an enigma to some, but bottom line they are supposed to produce good returns using a range of strategies including global macro, event driven and relative value (arbitrage). And, sophisticated or high-net-worth individuals (HNWIs) could

  4. Owen Li 'truly sorry' for blowing up $100m of hedge fund’s assets[more]

    From CNBC.com: A hedge fund manager told clients he is "truly sorry" for losing virtually all their money. Owen Li, the founder of Canarsie Capital in New York, said Tuesday he had lost all but $200,000 of the firm's capital—down from the roughly $100 million it ran as of late March. "I take r

  5. Indices - Barclay CTA Index gains 7.71% in 2014; largest traders return 12.31% for the year, Wilshire Liquid Alternative Index family outperforms investable hedge fund index counterparts in 2014[more]

    Barclay CTA Index gains 7.71% in 2014; largest traders return 12.31% for the year The Barclay CTA Index compiled by BarclayHedge gained 7.71% in 2014. The Barclay BTOP50 Index, which measures performance of the largest CTAs, was up 12.31% in 2014. “The BTOP50 had a strong finish, e