Institutional Investor's Alpha Magazine - June 2008 - (Page 24)

Technical Platforms for Multi-Prime Brokers “With our technology, a prime broker will not hold a hedge fund captive.” Sameer Shalaby Paladyne Systems ability to take on competing prime brokers. Now, says Farr, “We see prime brokers oﬀering software to their clients as a trend that has been and still is becoming more prevalent.” Consolidating Trades Brech says the big issue, when it comes to competition, is not over technology from third-party integrators or the services of other prime brokers. Instead, clients want to know that Credit Suisse can make it easy for them to consolidate the daily trades made through a group of prime brokers. “Going multi-prime is always diﬃcult,” says Brech. “Through our partnership with Paladyne, we can help create a technology solution to facilitate this step and, most importantly, ensure that what is promised is delivered. We know that every prime broker has a diﬀerent client proﬁle, and we tend to work with the larger hedge funds. We know that the larger hedge funds have to diversify counterparty risk and have multi-prime brokers, so we advocate open access and open architecture. We act as the main prime broker and help our clients set up their own technology platform to support their workﬂow processes and allow them to go multi-prime. We help to reduce the technology dependencies Issues Faced by Managers with Multiple Prime Broker Relationships: • ADMINISTRATIVE • Multiple primes translate to increased counterparty monitoring for the additional accounts and points of contact. • FRONT-OFFICE • Multiple prime brokers may require mangers to utilize multiple execution platforms for direct market access. Since most prime broker execution platforms are single prime oﬀerings, managers will need supplemental trading applications and order management capability. • MIDDLE-OFFICE • Multiple prime brokers create the need for aggregated portfolio reporting, accounting, and risk management. This need is most signiﬁcant because it requires the manager to consider building infrastructure or outsourcing services to a third party. • BACK-OFFICE • Multiple prime brokers require more complicated trade allocation and reconciliation processes which result in higher error rates and more resource requirements. Managers are again forced to add staﬀ or leverage outsourced service organizations. Source: Paladyne Systems clients have on their prime broker so that prime broker business is competitive and not captive.” In June 2007, Credit Suisse unveiled Advanced PrimeSM , a prime services oﬀering that includes all of the traditional prime brokerage services coupled with a multi-prime technology platform oﬀered through its Paladyne partnership, and complete middle- and back-oﬃce operations support through Viteos Capital Market Services, an Indian provider of administration and outsourcing services. Advanced PrimeSM also incorporates expert consulting and implementation services, process automation and business continuity through these and other strategic relationships with best of breed vendors. Citi is now in a partnership with Linedata Services’ Beauchamp Hedge Fund Solutions to give hedge fund clients a technology platform called Open Prime, which is designed for multicurrency, multiasset and multistrategy investing. Linedata also has partnerships with Scotia Capital in Canada and Investec in South Africa. “The technology is broker agnostic and works across all geographies,” says Salvage. The Open Prime system incorporates Beauchamp’s software but also includes proprietary connections with major electronic execution avenues and broker trading algorithms. At the end of each trading day, the hedge fund manager can send relevant data to each prime broker for reconciliation. Citi functions as host for the system and takes care of maintenance and disaster recovery. Prime brokers are increasingly using integrated, open-source technology platforms as a competitive strategy. “We view this as part of what sets us apart from the other prime brokers,” says Salvage. “We’ve been doing this a little over a year and have 25 clients signed up. The interest from clients has surpassed our expectations.” ● 4 • Alpha Sponsored Report • June 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - June 2008

Investor's Alpha Magazine - June 2008 Contents Letter From the Editor Longs & Shorts Cover Story: Alpha Hall of Fame Bruce Kovner Michael Steinhardt Kenneth Griffin Louis Bacon Steven Cohen George Soros James Simons Seth Klarman Julian Robertson Jr. Jack Nash Leon Levy Paul Tudor Jones II Alfred Winslow Jones David Swensen Looking Ahead: Back to the Future Research Center: Europe Hedge Fund 50 Unhedged: Let the Sunshine In

Institutional Investor's Alpha Magazine - June 2008

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