HFT Firm Potamus Looks to Outsourced Trading, New Asset Classes

High-frequency firm Potamus Trading is looking to expand into outsourced trading and other asset classes as it continues to grow its trading platform’s client-base.

The Boston-based company, which launched its low-latency, co-located trading platform last year, currently offers high-speed execution for large volume orders of US equities. Japanese financial services firm SBI Holdings, through its subsidiary SBI Crypto Investment, made an investment into Potamus last year as well.

Kristin Linnell, managing partner of Potamus, says while there are no concrete plans yet, it’s natural that the company expands its high-frequency algorithmic trading platform to assets other than US equities.

“We see the potential for our offering to expand to other asset classes, and then obviously, given SBI is based in Japan, down the road there may be an opportunity to trade in Asia and in other markets,” Linnell says. “The next step might be to expand into futures or currencies, but that will, of course, depend upon the demands of our existing client base.”

She adds Potamus may look into offering a means for Asian traders to access US markets along with offering access to Asian markets for US traders.

Potamus continues to ramp up usage of its platform and is pushing to attract more clients. According to Linnell, early users of its service have been high profile clients who are looking to use different sources of liquidity particularly for large orders but the company has also begun servicing a more varied clientele in terms of size.  

Another area Potamus is interested in entering is outsourced trading, especially as funds are looking to cut investment costs. Many companies have expressed interest in creating outsourced trading desks since competition from passive investing prompted the offering of little to no-fee products and additional pressure to cut costs.  

“Outsourced trading is another area where I think we could potentially grow. Those are [investment] costs borne by investment managers that they also want to cut as they seek to more effectively manage their organizations,” Linnell says. “There’s a question of whether investment managers need an in-house employee to manage execution or if it is more effective to partner with people who can manage it for them. I think we can be a strong partner to our clients in this regard in the future — using our analysis to manage orders.”

Linnell says Potamus offers transparency around execution and does not charge agency broker fees so it hits many of the needs of clients looking to outsource their trading desks. She says the company doesn’t charge commissions which help cut down on execution costs as well.

Potamus is currently not contracted to do any outsourced trading, says Linnell, as outsourced trading requires transaction cost analysis and post-trade services that is beyond what the company currently offers.