How AllianceBernstein Built a Better Trading Platform
March 30, 2009
While others debate the relative merits of order management systems and execution management systems, Michael Schwartz, COO of global trading at investment manager AllianceBernstein, created a hybrid to get the best features of both.
Schwartz wanted to meld the data management, reporting and compliance capabilities of an order management system (OMS) with the speed and broader connectivity typically associated with an execution management system (EMS). The goal, he says, was to build a single, streamlined system for long-only equities traders at AllianceBernstein, a New York-based firm that offers about 80 mutual funds and has almost $400 billion in assets under management.
The initiative entailed identifying a best-of-breed EMS--in this case Portware--and bolstering it with the capabilities of the firm's two OMS: an in-house system and Linedata Services' Longview Trading. The combined platform serves two groups--the private client trading desk and institutional investment trading division--with vastly different workflows.
The results have been positive, according to Schwartz. "We are now better at understanding our own behavior," he says. "With the new hybrid system, traders are able to teach themselves on a daily basis what they did right or what they didn't do right" in meeting their portfolio managers' goals and improving performance.
However, the project, which was undertaken with two or three IT staff members, input from clients and management backing, took two years and considerable resources, says Schwartz.
Finding an EMS
First, Schwartz's team evaluated three EMS providers against a checklist of functions and cost guidelines. With feedback from traders and management, Schwartz determined which features were critical. "In this way, we were able--over time--to determine who would be a good partner for us and who could get the work done," he says.
The EMS either needed to be compatible with AllianceBernstein's quantitative overlay or easily allow the firm's analysis to be added to the system, according to Schwartz. The ability to modify database connectivity was also a major concern, as was capacity, given the scope of the firm's activities. "We are a large firm; we manage a lot of assets and wanted to be sure that the systems could handle the load of trading that we do," he explains.
Schwartz was also looking for software that had strong program trading functionality. The firm wanted to be able to trade lists of as many as 3,000 stocks and perform real-time analytics on them.
Portware was selected, says Schwartz, in part because of its ease of use and flexible interface. A number of traders and technology staffers at AllianceBernstein had also worked with the Portware system at other firms. "They knew the platform inside out and that made the integration process very easy," he says.
New York-based Portware refers to its system not as an EMS but as a "strategy server" combined with a complex event processing engine and open application programming interface, says Scott DePetris, global head of accounts at Portware. "This allows for easy integration with outside analytic tools, risk capabilities, black-box and analytic packages," he says, adding that although the software is written in Java, it is designed for integration with other languages and platforms.
One of the challenges in the AllianceBernstein integration was creating a seamless platform for two desks with different needs, notes DePetris. But ultimately, both groups got "the efficiencies of trading from a single system, running analytics across a combined entity--a huge deal for any firm with internal complexity," he says. AllianceBernstein equity traders now have centralized compliance rules and real-time risk. And because automated processes can quickly be created, the firm can scale up their capacity while working with the same number of traders. The platform can also handle up to 50,000 market data ticks per second.
