By Stewart Eisenhart

At last year's SIA technology management conference, compliance was the buzzword. This year's show towed a similar line - not surprising, given the approaching SEC hedge fund registration deadlines. It was remarkable how many new exhibitors were hanging up hedge fund compliance shingles, but managers would do well to question the wisdom of implementing untested solutions from vendors with limited track records, especially considering how crucial this function has become; a technology problem could quickly become a compliance problem come next February. Beyond compliance, a number of buy-side vendors reported efforts to expand coverage of derivatives trading, a further indication that more hedge fund and institutional firms are turning to these instruments for hedging and alpha sources. By Stewart Eisenhart

Iris targets top-tier hedge funds
London-based Iris Financial, long active in the sell-side trading and risk management technology arena, is looking to expand its presence into the large-tier hedge fund market.

Iris chief executive Michele McGovern, who recently joined the firm, sees a need by hedge fund managers with more complex strategies, substantial capital and high volumes for the same types of systems currently in use at investment banks' proprietary trading desks. Over the next 18 months, the firm plans to unveil products geared particularly towards hedge funds active in credit derivatives markets. Managers in these markets have been largely undeserved by third-party providers up to now, according to McGovern, who adds that Iris is also looking to accommodate equity and program trading capabilities in its hedge fund products.

"We're looking at partnering with prime brokers for white-labelling arrangements, and will focus on scale and speed to market," McGovern says.

An initial hedge fund strategy should be devised by the third quarter of this year, she reports.

Trema expands derivatives coverage
Front-to-back asset management system developer Trema is readying version 7 of its buy-side product suite for launch in August or September of this year.

The updated version will include enhanced processing for derivatives, including total return swaps, as well as support for structured products, according to Trema Americas sales director Jeff Smith.

The new version will also feature improved workflow elements to more fully mitigate open position risks associated with derivative trading confirmations, Smith explains.

LatentZero rolls out Capstone, Minerva upgrades
Buy-side front-office technology vendor LatentZero has rolled out a new version of its Capstone suite that includes a derivatives trading tool, Capstone Derivatives, as well as an upgrade of its Minerva order management system, Minerva 4.0.

Dan Watkins, chief executive of the firm's North American operations, says the Capstone Derivatives application was developed in response to buy-side clients' growing interest in using derivatives as hedging devices in their portfolios; some managers are also looking at derivatives as an alpha source, he reports.

The product features analysis, deal structure and trading capabilities for both individual and basket trades for credit default swaps, interest rate swaps, cross currency swaps and basis swaps. Capstone Derivatives is fully integrated with LatentZero's Minerva OMS, Sentinel compliance and Tesseract portfolio analysis modules. The tool also includes a pricing and valuation component that provides pricing calculations using real-time market data, according to Watkins.

Capstone Derivatives is currently available for beta testing; Watkins says three investment managers in the US and Europe are currently implementing the application. The firm is also launching version 4.0 of its Minerva OMS with enhanced analytics capabilities. The upgraded system allows integration of pre-trade analytics from broker/dealers into clients' trade blotters.

In addition, Watkins says LatentZero applied a heat mapping concept to version 4.0: trade orders are colour-coded based on degree of market impact and other characteristics, and brokers are assessed based on performance, graphically illustrating best trading strategies to users. Minerva 4.0 also provides improved commission management capabilities for equities trades, as well as support for equity, fixed income and foreign exchange futures trading.

Calypso designs a more integrated platform
San Francisco-based sell-side and hedge fund trading system developer Calypso Technology is working on a single integrated trading process for its multi-asset trading and risk management platform.

Dutt Chintalapati, general manager for the Americas at the firm, says the enhanced platform will aggregate position, risk and P&L data in one place on a real-time basis, and should appeal to a target audience of credit, relative value and infrastructure hedge funds. According to Chintalapati, enhancements are still being hammered out, and a formal announcement is expected at year's end.

Macgregor launches stand-alone compliance platform
Buy-side OMS developer Macgregor has unveiled XIP Enterprise Compliance, a new pre- and post-trade portfolio compliance system.

Michael Woodward, vice-president of new OMN (Order Management Network) services at the vendor, explains that the system will be available both on a stand-alone basis and integrated with the firm's Macgregor XIP Order Management Network.

The Macgregor XIP Enterprise Compliance product provides centralised access to monitor compliance rules, research and resolutions, and allows users to build customised pre- and post-trade rules.

The system covers all asset types, according to Woodward, and provides automated compliance for high-volume portfolios to reduce bottlenecks and satisfy regulators and auditors with expansive reporting capabilities.

The system provides portfolio managers with real-time impact analyses, fund status against all relevant rules in place, and tools to manage and reduce exceptions; compliance officers with research tools, a library for regulatory, firm-wide and client rules, and rule-building facilities; and traders with impact analysis tools to avoid placement or allocation exceptions. Woodward says a $12 billion investment manager has begun implementing the compliance system. He expects that the Macgregor XIP OMN will fully incorporate the product by the fourth quarter of this year.

GoldenSource reports growing buy-side data management efforts
GoldenSource, a New York-based enterprise data management technology developer, reports increasing interest from investment managers in centralising data management functions through the vendor's platform.

Michael Meriton, president and chief executive at GoldenSource, says buy-side efforts to manage security master files, which require data standardisation, and meet know-your-customer (KYC) requirements of the USA Patriot Act and other regulations, which require standardised customer information, have pushed the need for enterprise-wide data management at these institutions.

In addition, Meriton reports that some managers have realised the need to centrally manage position data across asset types.

"Some firms don't know positions across asset types because they lack integration," Meriton says. "When it comes to risk, their focus is shifting from business line risk management to enterprise risk management."

Meriton notes three ways in which buy-side firms usually implement the GoldenSource system.

First, a manager starts down the data management path with a security master file and one or two instruments-a process Meriton analogises as "how to eat an elephant one bite at a time."

Second, when a firm rolls out a new line of business such as a fixed income platform, managers decide to power that with good underlying data.

Finally, Meriton says some firms approach the data management overhaul process one line of business at a time, and then elevate it to a group-wide function.

Buy side GoldenSource clients include Franklin Templeton, Credit Suisse Asset Management, and Northern Trust, Meriton reports.

Eze Castle Integration readies ASP, research subsidiary
Buy side and hedge fund outsourced IT service provider Eze Castle Integration (ECI) is developing a browser-based, fully hosted data network, and will formally launch an investment research unit, Eze Castle Research, later this year.

The ASP data network will entail hosting of all network equipment at ECI rather than at client sites, enabling faster deployment at lower cost to customers.

The research unit will provide asset and hedge fund managers with customised reports on the technology, media and telecommunications sectors, says ECI managing director Chris Grandi.

ECI has also signed a new $2 billion hedge fund client looking to outsource its IT infrastructure, according to Grandi.

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