Instinet Enhances Newport EMS to Help Reduce Operational Risk

OneTicket will allow buy-side firms to reduce their operational risk by streamlining the parameter terminologies for the various broker-provided algorithms, says Erin Sheehan, Newport product strategist.

"The sell side has done a good job of innovating on the algo front, but an unfortunate side effect has been that the buy side is now inundated with various parameter terminologies, creating operational risk," she says. "OneTicket streamlines that and lets the buy side dictate to the sell side what they want."

As an example of the confusion that can be created by using all these different options, Sheehan says that the algo providers define the parameter settings, in some cases using numbers like one to 10 or one to five, or words, such as passive, moderate, aggressive and super aggressive algorithms. OneTicket creates a uniform "destination ticket" for the trader's various suites of algos.

"So a buy-side trader using a half dozen algo suites may have to keep straight six different parameter conventions, which at best is confusing and at worst creates operational risk," she says. "With OneTicket, we work with each client's various providers to develop a uniform destination ticket regardless of provider, thereby enabling the buy side to dictate the terms to the provider rather than vice versa."

According to Instinet, the parameters are set once and normalized across the buy-side firm's various counterparties through the destination ticket. This is also meant to make it easier for clients to conduct transaction cost analysis (TCA) comparisons.

"Because parameters can drive dramatically different behaviors in algorithms, controlling the parameters and values allows users to accurately make performance comparisons between multiple brokers' algos," Sheehand says, adding that Instinet worked with "several clients" for this rollout, and those clients are now fully live.

This release is version 3.15 of the Newport system. Also included in the rollout is the ability to set a range of default "secondary symbols" against which the primary symbol's price is compared, and expanded constraint functionality that searches the opposite side of an order elsewhere on a user's desktop.

Additionally, crossing tickets now support US-listed options for both single-leg orders and multi-leg orders and added connectivity to major markets for futures trading in the Asia-Pacific region, such as Australia, Hong Kong, Japan, Singapore and South Korea.

"Adding access to the Asian futures markets was simply the next step in evolution of our derivatives offering, which we've been working to build out over the last two to three years," Sheehan says.