As an investment professional, you’re no stranger to the trading lifecycle. It’s one thing to strategize and construct a solid portfolio – but it’s a whole other game to execute those plans over the long term.
Here at Flyer, we break the trading lifecycle down into four digestible parts:
Using our proprietary Co-Pilot system, investment professionals everywhere can use automation software to expedite the trading lifecycle – leading to greater efficiency and increased accuracy across the board.
The trade creation process hinges on accurate data and efficient tools – especially in this first, all-important step.Consider a chess game, where the first move can determine the course of the entire match. Done correctly, that opening move can position you for an easy win – while a hasty choice can leave you disadvantaged down the road.The same is true for trade creation. And although each investment professional has a unique strategy, you need a consistent and reliable way to ensure your clients have access to fast-moving opportunities in today’s market.
Let’s explore how old-school approaches to trade creation can hinder your clients’ portfolios, as well as how the right technology can offer a scalable (and more efficient) alternative.
Trade creation requires consistency – and many tech solutions try to meet that need through standardized, cookie-cutter processes. Investment professionals end up repeating the same routine tasks for each client, which hinders personalized attention and bottlenecks efficiency at scale. Moreover, those repetitive tasks are time-consuming, especially as you work to keep clients in line with their goals. The more complex and high-net-worth the client, the more difficult it is to batch accounts together for rebalancing. The right technology can offer a path forward toward customizable portfolio management and scalable growth.
Flyer’s Co-Pilot serves as your agile portfolio management and trade creation tool so your technology enhances your process, instead of impeding it.
Our system:
With Co-Pilot, you can view a cash flow report to determine if some accounts received a deposit, then set automatic triggers to tell you when there is available cash to spend in accounts. Co-Pilot offers flexibility and accuracy by automating the repetitive busy work investment professionals find themselves running up against in their day-to-day tasks.
Once you create and send your trade orders electronically, we take care of the rest. There are no files to generate, download or upload. The result: Better client experiences and reduced risk. Co-Pilot ensures your first step in the trading cycle is done correctly and quickly, setting the tone for successful trade order management, allocation and post-trade processing.
FINRA states that:
“Best execution is a significant investor protection requirement that essentially obligates an investment professional to exercise reasonable care to execute a customer’s order in a way to obtain the most advantageous terms for the customer.”
In essence, you’ve got to be on the ball in trade order management – there’s no room for error. But that’s not necessarily a bad thing, since best execution can have such positive effects for your firm.
For one, best execution ideally leads to happier clients. When you have tech that puts you in control, you can deliver better portfolio results. And who doesn’t like that?
Using the right tech to achieve best execution in trade order management can also protect your firm against possible regulatory infractions. For example, you need evidence that your processes are in line with Form ADV when the Securities and Exchange Commission (SEC) comes knocking – and Flyer Co-Pilot offers just that.
Advanced trading techniques like order limits, algorithms and alternative trading systems (ATS) have historically been reserved for institutional investment professionals using complex execution management systems and very advanced OEMS systems.
Flyer Co-Pilot trade order management software now brings these capabilities to the masses and enables investment professionals everywhere to access them at scale.
With our technology, you have access to trade order blocking that allows you to ensure all your trades get executed at once. It also helps avoid competition, so every client gets the same price regardless of the amount they have invested.
Working the Order
Trading technology also offers significant advantages in working orders by breaking them down into smaller increments and leveraging trade algorithms and instructions. This approach allows investment professionals to have greater involvement in trade execution, leading to improved control and better investment performance.
Unlike the traditional method of making phone calls to place orders, trading algorithms like VWAP algo enable traders to set specific parameters and communicate their desired trade approach to the destination.
Additionally, traders can execute a partial order to evaluate execution quality before completing the remaining amount, ensuring informed decision-making.
Note: Avoiding Self-competition
In a situation where trade order blocking is not viable or attainable, and having competing orders, defining a rotational strategy is critical to avoid competing against yourself.
Moreover, Co-Pilot’s technology gives you the ability to explore alternative trading venues and find more competitive execution prices, avoiding potential self-competition by trading the same symbol at different destinations.
As an investment professional, your primary responsibility is to cater to your clients’ needs and help them achieve their financial goals. Unlike hedge funds, which have more flexibility in trading shares for the fund as a whole, your role involves making individualized decisions for each client to move them closer to their goals.
To optimize trade allocation, you have two options: The first entails manual intervention, where you generate and upload the allocations manually. Alternatively, you can leverage software like Flyer Co-Pilot that automates the generation and electronic submission of the allocations.
Fully executed orders are auto-allocated with Co-Pilot, meaning you don’t have to take any actions. For partially executed orders, you’re required to distribute and execute fairly across portfolios.
Co-Pilot automates this process by providing distribution methods. As a default, Co-Pilot will prorate the distribution of shares for each portfolio (see the below chart for more information on pro-rate distribution).
In cases where the order is a partial fill and you choose to use a method other than our standard pro-rata (where shares are equally doled out to accounts that need them), you’ll have to take some steps to finish things off correctly. Co-Pilot will allow you to change allocation methods to your preferred methodology, and in some cases avoiding unnecessary fees.
equally doled out to accounts that need them), you’ll have to take some steps to finish things off correctly. Co-Pilot will allow you to change allocation methods to your preferred methodology, and in some cases avoiding unnecessary fees.
Note: You have the option to retain the remaining unallocated quantity on partially filled orders for trading the next day to fill them then, or choose to cancel the remaining.
This common method delivers fair allocation and distribution based on an account’s target allocation quantity.
The random method avoids commission charges on small allocations.
This method allocates based on target quantity size.
A manual method, as the name suggests, allows portfolio managers to allocate everything manually
Pricing by Order involves allocating average prices to single block orders. For example, if different trades for the same security are executed at $26 and $25 throughout the day, the Pricing by Order method would assign the respective prices to each order.
In contrast, the Average Pricing by Destination method (employed by Flyer) calculates the average of these prices and assigns it to the trades for that security.
This results in a more fair and equitable outcome across all your accounts and clients, while mitigating the possibility of one portfolio having much better performance than another simply because it was traded at a different time in the same day.
Once trade allocation is complete, you’re ready to move onto the fourth and final step: post-trade processing.
The day is nearly done and your team is ready to head home – but first, you’ve got to finish up that all-important post-trade processing. Luckily, Flyer Co-Pilot has a built-in automation system that can simplify and expedite this process, getting you and your team members out the door in a fraction of the time.
Co-Pilot OEMS utilizes the Flyer Trading Network to transmit post-trade notifications electronically to your brokers and custodians. This ensures real-time receipt acknowledgment and seamless communication.
In cases where electronic delivery is not a possibility, Co-Pilot OEMS correctly formats files for each counterparty. These files can then be conveniently communicated through methods like SFTP file drops or made available for you to upload.
The result? Higher efficiency, fewer errors and less time manually completing tasks at the end of your day.
Co-Pilot also works with third-party accounting systems to pull in your reconciled data for trading through an automated process. This means we notify your accounting system of choice to make sure you have accurate, up-to-date information in every account for portfolio performance and reporting.
You can then choose to send trade allocations intraday or next day depending on your specific workflow needs. By the next morning, those trades are reconciled with what the custodian has sent.
And if you’re interested in adding new third-party integrations to your Co-Pilot software, we can integrate via file or API for both start-of-day tax lot positions and end-of-day allocations.
Our goal is to automate as much of the trading process as possible through next-gen technology, giving your organization faster, more accurate results for each and every trade.
Co-Pilot centralizes investment strategies and models, positions, and trading across all major asset classes so you can finish your work quickly and with confidence.
Click here to request your free demo of Co-Pilot OEMS and to learn more about how you can create more efficient workflows with Flyer.
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