Investment Technology Group (ITG), Inc. (NYSE: ITG), a leading agency research broker and financial technology firm, and Pohjola Asset Management (PAM), Finland’s leading fund manager, today announced the launch of a Smart Routing and Algorithmic Trading Service.
The product is a result of the collaboration between the two companies which sought to create a low cost, highly efficient execution facility that delivers dramatically improved trading performance. This superior new offering will also be made available to third party institutional traders.
The project, which combined PAM’s execution know-how and ITG’s market-leading infrastructure, involved considerable research and development commitments from both parties. It also required ITG to undertake the creation of an ultra-low latency data centre in Stockholm and the re-construction of order routing and connectivity software.
Commenting on the new offering, Simo Puhakka, Head of Trading at Pohjola Asset Management, said: “The origin of this offering was our desire to reduce slippage costs when trading equities for our funds. We thought that it must be possible to create better Smart Routers and Algorithms for buy-side traders, so we made a decision to build our own buy-side controlled SOR (Smart Order Router) together with ITG. Our SOR has given us significantly better performance on implementation shortfall costs compared to the ones we have used before. It quickly became apparent that there is demand for this performance level from other institutional traders, so we decided to set up a separate entity Pohjola Asset Management Execution Services Ltd ("PAMES") to market and further develop the platform. The buy-side SOR is now offered to institutional traders and asset managers by PAMES, which is 100% owned by PAM. I’m pleased to announce that the first third-party client has gone live.”
Commenting on the 12 month period of research and development, Rob Boardman, CEO of ITG in Europe, said: “ITG was happy to accept the challenge, although at the outset it wasn’t clear what would be the full extent of the possibilities by combining PAM’s execution know-how and ITG’s infrastructure. To achieve the required performance we found it necessary to build a new ultra-low latency data centre and re-construct our order routing and connectivity software. The new infrastructure combined with PAM’s customized routing logic and analysis has produced significant advances in benchmark performance for PAM.”