The TIM now has in excess of 2,000 users at more than 100 buy- and sell-side firms, primarily in London, New York City and Tokyo, attracted by the TIM's ability to deliver features and benefits similar to those popularized by the proprietary Trade Optimised Portfolio System (TOPS) used by renowned UK hedge fund Marshall Wace, and by the continued addition of value-added features and integration with third party data sources.
Earlier today, Trade Ideas Limited (TIL), the organization jointly established by a consortium of four of the largest brokerage firms (Citigroup, Credit Suisse, Dresdner Kleinwort and Merrill Lynch) to own and operate the RDC, announced that more than 50 brokerage firms -- including all 10 of the major investment banks involved in early discussions on the creation of the TIL -- have begun to route ideas to buy-side clients via the RDC, and that the overall user base of contributors now numbers in the thousands.
"The twin driving forces behind this growth are the continual pursuit for Alpha among proprietary trading desks and buy-side managers, combined with their need to comply with new unbundling regulations governing the allocation of trading commissions between execution, and research, or soft dollars," said Colin Berthoud, Director of youDevise.
Trade ideas put investment research into action. Typically authored by institutional brokers, trade ideas not only identify and recommend the purchase or sale of a particular stock, but also at what price and point in time, as well as how much money the broker suggests fund managers commit to the stock, thereby weighting the idea. The TIM enables trade ideas to be developed and transmitted electronically and in a structured format, so recipients, including hedge funds, institutional managers and proprietary trading desks, can use the TIM's powerful analytical tools and integrated features to identify the best performing ideas and the brokers who authored them. Prior to the TIM, trade ideas were typically communicated ad hoc via phone or email, or sent through proprietary in-house systems, such as TOPS, which were not linked to the RDC.
"The first wave of TIM users were driven primarily by sell-side proprietary trading desks," said Mr. Berthoud. "Speed in receiving ideas and time-stamped, audited transmission were key factors to these customers. The second wave was hedge funds. Developing value, better idea management, and more scientific awarding of research commissions was the motivation there. Seeking similar benefits is a third wave of more traditional money managers, who are now specifically requesting that sell-side brokers send ideas via the TIM according to their specific rules, and allocating commission based on performance."
Approaching the one-year anniversary of the product's launch last fall, youDevise's continued enhancements have evolved the TIM into a powerful web-based trade idea portfolio workstation:
* Themed Portfolios - Enables sell-side firms to send ideas based
around a specific central investment strategy and organized under a branded name.
* News - Through an alliance with The Relegence Corporation, the
TIM now offers real-time news and information on a particular stock, in a format that helps users swiftly take advantage of trading opportunities.
* Home Page Dashboard - Provides sell-side managers with a
real-time display of the number and types of ideas all their sales and research teams are sending clients.
* Idea Control - Empowers clients with the ability to set the
number, investment amount, and type of ideas that can be sent to them by a specific sell-side firm.
* Report on Author Performance - Generates a detailed analysis of
an individual broker's ideas, including win probability and expected returns.
* Research - Links with products such as Reuters' 3000 Xtra to
give users the ability to drive queries directly from the trade ideas on research, news, and other data- and even to populate an order blotter.
Third party reviews of the TIM have been favorable. In June 2006, the core technology at work in the TIM was named "Innovation of the Year" in The Banker magazine's annual Technology Awards. In July 2006, an article in The Journal of Investment Compliance cited the TIM as a good example of how relatively low-cost trade idea management systems can be put to work "capturing lost value and generating increases in productivity for all involved." Last week, the Financial Services Authority in the UK issued its first official comment on Alpha Capture Systems, noting the growing trend of sell and buy side firms using such systems, praising their clear audit trails, and listing a series of good practices.