Mon, May 21, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

Practitioner Viewpoint: Trading trends from Saratoga Futures and SunGard

Wednesday, December 02, 2009

Cross-Trading Trends

Futures trading is attracting money managers who previously traded stocks or other securities, not futures. Part of the attraction may be that bank credit is now hard to get and futures instruments enable you to put on more trades with the same capital. At the same time, some commodity trading advisors have become interested in cash equities.

Here, several people who work with CTAs, futures commission merchants and hedge funds comment on the trends.

Jay Lefkowicz, a principal of Saratoga Futures, an introducing broker that works with a number of FCMs, says traders are crossing over in both directions:

“One major trend we are seeing is that more players are trading a variety of asset classes. We have seen traditional equity hedge fund managers begin trading index futures and, at times, commodity futures. Conversely, we see quant futures traders applying their models to cash equities.

By working with a number of multi-asset class futures commission merchants, our clients can deal with one bank and cross-margin their holdings.

Another trend is that more money is moving into managed accounts. Managed accounts create logistical difficulties for transaction allocation and settlement. By utilizing the right futures commission merchant and trading platform, we can help managers streamline the process.”

Cross-Trading Trends Paul Compton A fund may trade both stocks and stock index futures. How does risk management work for multiple asset classes? We asked Paul Compton, head of product management in SunGard’s alternative investment business. Mr. Compton says the key is to integrate multiple asset-class positions and calculate net exposures:

“The first object is to have all the positions on the same systems, from both the trade processing perspective and the position and risk management perspective. We offer tools that deal with multiple assets, all in a single framework—commodities, futures, options, stocks, bonds.

You don’t want to do your cash equity risk analysis and stock futures risk analysis separately and then try to put them together, because then they don’t fit. Our buy-side system has cross-asset coverage. This is not an empty box application but a whole service, including our extensive data coverage. It does not make sense for customers to build it themselves.

With regard to risk management, there are different levels. You have to drill down to the exposures to individual stocks and futures, long and short. Then you’ll see the net exposures by sector, country, etc.

A second level of risk analysis, which our APT product does well, is to look at the economic drivers of asset prices and the correlations. If you have an exposure to the US dollar/euro exchange rate, say, you can analyze how it will affect your portfolio indirectly through patterns of correlations and relationships. We can do this in real time, or update as frequently as the portfolio manager wants.

APT does well with extreme events. We saw that last year. It signaled high risk in the weeks before and after the Bear Stearns and Lehman Brothers collapses.”

What happens as traders move into new asset classes? We asked Tony Scianna, executive vice president of SunGard’s brokerage & clearance unit. He says the company offers a complete suite of products from execution to clearance for listed derivatives and provides services to more than 105 futures commission merchants globally.

“As new asset classes and futures markets develop, they get integrated into our software. So, for instance, SunGard supports carbon credit futures at a number of exchanges, including Chicago Climate Futures Exchange, LCH Emissions market, ICE, EEX and NYMEX.”



 
This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
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. News Briefs - Warren Buffett: Target date funds aren't the way to go, Cambridge Analytica could be reborn under a different name[more]

    Warren Buffett: Target date funds aren't the way to go Planning for retirement can be complicated and stressful. This is why target date funds - funds that are managed based on when you expect to retire - are so attractive. Over time, the balance of stocks, bonds and cash evolve automati

  2. Investing - Hedge funds hike Smurfit Kappa positions amid takeover deal hopes, Hedge fund IBV Capital digs deep to unlock long-term value in a competitive market, Eisman of 'The Big Short' fame recommends shorting Deutsche Bank[more]

    Hedge funds hike Smurfit Kappa positions amid takeover deal hopes From Irishtimes.com: Two US hedge funds, Davidson Kempner and York Capital, have accumulated a combined 4.74 per cent interest in cardboard box maker Smurfit Kappa using financial derivatives. It comes as many investors cl

  3. Foundations of hedge fund managers gave big to controversial donor-advised funds[more]

    In the world of philanthropy and tax-deductible charitable giving, the explosion of donor-advised funds has touched off intense debate. Now, there is evidence that the DAF boom is being further fuelled by hedge fund foundation money. Four of the top five foundations that gave the most to large do

  4. Study: For hedge funds, smaller is better[more]

    From Institutionalinvestor.com: The smaller the hedge fund is, the better its performance is likely to be, according to a new study. The study - "Size, Age, and the Performance Life Cycle of Hedge Funds," released April 26 - sought to determine whether a hedge fund's size and age had any effect on i

  5. Hedge fund returns rose in April for first gain since January[more]

    From Bloomberg.com: Bloomberg Hedge Fund Database shows returns flat this year - Currency strategies had the biggest monthly gain at 13% Hedge fund returns increased 0.78 percent in April, reversing two consecutive monthly declines. The swing of 134 basis points was driven by gains in all seven