| January 03, 2008 | -- Coping with the FX trading surge
Article from Dialogue, published by Lázaro Campos from SWIFT
(The following is extracted from the above article.)
BELGIUM, December 2007 (Dialogue Q4 2007) -- Capricorn Advisory Management, a specialist FX hedge fund and commodity trading adviser, conducts the vast majority of its USD 300 million to 500 million average daily trading volume electronically, via single and multi-bank platforms. Neither a user of algorithmic or high-frequency trading techniques at present, Capricorn’s focus on best execution demands close monitoring of trading platform performance and a high degree of automation by its prime brokers. “From an operational as well as a credit line perspective, we want the process of giving out trades to our spoke banks via the prime brokerage to be as smooth as possible,” says Mikkel Thorup, chief investment officer and founding partner. “Prime brokers need to have superior systems and high levels of automation, both for our ease of use but also to eliminate errors, particularly on give-ups,” he says.
Prime brokerage traffic has grown rapidly as hedge fund clients such as Capricorn trade greater volumes through electronic platforms. But because most trades are closed out prior to settlement, the industry is still developing automated, standardised back-office processes. In common with the dozen or so global banks with large prime brokerage businesses, Royal Bank of Scotland has already invested heavily in technology to handle increased FX volumes. Practically all deals are
received electronically, then automatically matched and credit checked before being processed
downstream, leaving staff to focus on exceptions and other services. “The aim is to ensure we always have a constant level of surplus capacity that is substantially in excess of our daily average peak volumes,” says Paul Houston, RBS Global Banking & Markets, FX Prime Brokerage. In the post-deal arena, the bank has automated functions such as deal allocations and averaging, and provides electronic confirmations and trade reports in real-time.
-Publisher: Lázaro Campos, SWIFT.
-Managing editor: Martine De Weirdt, SWIFT.
-Editor: Euan Sellar, SWIFT.
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Capricorn is an established currency manager with a global client base that includes; Banks, Asset Allocators, Institutions, Investment Funds and High Net Worth Individuals. As of today, the company has more than 50 years of experience within the investment advisory arena, and manages over US$70 million in client assets. For the last eight years Capricorn has produced superior risk adjusted returns in its investment programs, trading high liquid currencies as managed accounts and offshore funds for Individual and Institutional clients. The vision behind Capricorn is to reach our capacity of US$ 500 million, managing the assets of professional investors. To achieve this goal our aim is to provide premium investment programs that seeks, strong returns with low volatility and a low correlation to other investment vehicles. In order to strengthen our ability to add value to our clients’ portfolio, we choose to develop and maintain relationships with reputable financial institutions that are leaders in their field.
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