PROVING OUR CASE

Broker/Dealer workflow (prior to adoption of AFA’s technology)

XYZ Capital Markets (XYZ) provided execution and research services to institutional clients. Prior to its adoption of AFA’s technology, XYZ’s trading desk received trade orders from its clients via phone, email, instant messaging, etc. Some of these trade orders were generated by research ideas provided by XYZ’s research staff. At the end of the day, XYZ’s clients either called in their trade allocations or submitted Excel worksheets to XYZ’s back office for processing.

The senior management of XYZ wanted to grow its business by:

1. Increasing order flow from its existing customers
2. Attract order flow from small and medium size institutions by offering them electronic trading capabilities
3. Reduce costs and improve efficiency through electronic trading
4. Leverage capabilities of its algorithmic trading engines and program trading desk
5. Increase order flow generated from its research ideas while complying with regulatory and client demand

In order to achieve its objectives, XYZ also had to consider the following key trends shaping the brokerage business:

• Demands from existing and prospective clients for electronic connectivity to XYZ’s trading desk (via FIX protocol)
• Client requests for broker-neutral or multi-broker application
• Threat from competitors with proprietary or third party order management systems which would take away existing client business
• Unbundling of research from trade execution

In addition to market (external) constraints, XYZ’s management also had to be cognizant of internal sensitivities such as:

• Sales traders’ apprehension about increasing reliance on electronic trading.

In light of all of these considerations, XYZ’s management had several options for achieving its objectives through electronic trading. These were:

1. Build a proprietary front-end trading application with help of internal technology resources and bolt it on to a FIX engine;
2. Outsource development of an application; or
3. License a front-end application from a third party vendor

The senior management considered the first two options but decided against these due to constraints such as:

• Time to market – building an application requires significant resources and management time which XYZ felt would be distraction to running its business.
• Outsourcing management – XYZ felt that its technology organization would be stretched in managing development of an application by third party development firm.
• Costs – After factoring in time and other qualitative costs, XYZ’s management felt that developing an application in-house would be a costly proposition.

Having looked at various applications, XYZ decided to go with IMPACT Pro™, AFA’s application for following reasons:

• Multi-broker capability
• Live pricing feeds
• Multi-market, multi-currency capability
• Web-based fully-hosted deployment (no costs to client or XYZ)
• Single ticket and list trading capabilities
• Average pricing across accounts
• Institutional functionality:
  • Middle office (post-trade) functionality (for clients to process allocation of trades)
  • Electronic export of client data to client’s third party service providers
  • Customized reports & audit trails for compliance requirements
• Costs

With the help of IMPACT Pro™, XYZ was able to achieve its objectives by connecting existing and new clients to XYZ’s trading desk and increase order flow. In addition, IMPACT Pro™'s reasonable pricing and functionality (assigning tags to client orders to allocate sales credits to XYZ traders) enabled XYZ’s management to receive internal buy-in from its sales traders.

AFA has helped many other companies like XYZ (references available upon request) increase their trade execution business. AFA’s philosophy is simple – to provide an application with basic needs that directly help clients meet their business objectives in a cost-effective manner and not over-cramming technology with bells and whistles that may be great to have but don’t address commercial realities.

For more information, contact (212) 286-1245 or visit us at www.afapp.com