A group of fund managers have joined forces to create Harborside+, a new model for matching large block equity indications of interest (IOIs). However, Harborside+ is keen to dispel the idea that it is either an ECN or an ATS because the new service, which includes traders from both the buy- and sell-sides, aims to combine new technology with the old-fashioned trading desk.
“There are a number of services operating today that excel at small trade sizes, or offer all electronic matching and execution,” explains said Harborside+ Vice President, David Leone. “Harborside’s focus on large block executions that are negotiated through an experienced desk fills a need for institutional traders, particularly in today’s trading environment. We envision Harborside+ flourishing quite successfully, in tandem with other services.”
Approximately 70 firms have pilot-tested Harborside+ in recent months, including Boston Partners, Cadence Capital Management, David L. Babson Funds, Heartland Advisors, Munder Capital Management, Northern Trust, Pioneer Investments, The Boston Company and William Blair Asset Management.
“Finding the other side of a large block without causing market impact is a major concern for traders and portfolio managers; our service addresses that problem,” explains Harborside+ President and CEO, Robert C. Hall, a thirty-year veteran of the securities – including spells as an EVP at the New York Stock Exchange and CEO at Thomson Financial.
Harborside+ is financed by by Commonwealth Ventures and Mellon Ventures, with additional participation from NeoCarta Ventures and a number of individual investors.
Traders submitting IOIs to Harborside+ only indicate side (buy or sell) and symbol. Unmatched IOIs are not seen by anyone, including the Harborside+ trading desk. Buyer, seller and Harborside+ trading desk are electronically alerted once the system finds a match, whereupon the service switches from the matching technology to the trading desk. The Harborside+ trading desk assists counterparties in finalizing the transaction, through phone-based communication that keeps the identities of the buyer and seller confidential.
“Trading large blocks effectively is more an art than a science,” says Munder Capital Management Director of Equity Trading, Dennis Fox. “Technology alone won’t solve the difficult trades, and that’s why Harborside’s trading desk plays an important role.”
The technology underpinning Harborside+ is utilized as an enabler for pre-qualifying buyers and sellers of size: IOIs start at a 25,000-share minimum (the service is averaging 70,000 shares per trade). IOIs may be submitted to the Harborside+ central server in several ways: a firm’s order management system via an application interface jointly created by Harborside+ and Macgregor (that supports Macgregor and other OMS providers including Eze Castle, Charles River Development, LongView and Decalog); a Web-based GUI developed by Harborside+; direct FIX connections; links with FlexTrade Systems, Triad or Tradeware; or by phone to the Harborside+ agency desk. “Our neutral trading desk headed by Vice President of Trading, Mike Earlywine, an early member of ITG/POSIT, is in place to see that trades happen in the most efficient manner for both parties,” adds Hall.
Harborside+ says a “blended” approach of technology and live support is deemed most effective for successfully trading blocks, and especially in negotiating for larger sizes, accommodating conditional requirements and step-out trades. Trades are executed by Harborside Securities, an independent registered broker/dealer. “Apart from its unique combination of automation and live trading desk support, Harborside+ is also distinguished on a technology cost basis,” explains the company. “Easy to install and access, the essentially plug-and-play service is designed for rapid distribution to a large network of traders, requiring no costly IT support, installation of a file server or dedicated lines to the client site.”
IOIs may be submitted to the Harborside+ central server in several ways: a firm’s order management system via an application interface jointly created by Harborside+ and Macgregor (that supports Macgregor and other OMS providers including Eze Castle, Charles River Development, LongView and Decalog); a Web-based GUI developed by Harborside+; direct FIX connections; links with FlexTrade Systems, Triad or Tradeware; or by phone to the Harborside+ agency desk.
Harborside’s IT and operations are headed by Seth Gelberg, vice president of technology and CTO. Gelberg’s experience includes work for the American Stock Exchange and NASDAQ, as well as positions with Oracle Corporation, Market Axess and Refco Group. Harborside’s management team is expanding, with the recent hire of Michael S. Cashel as chief operating officer. “Michael brings a wealth of experience in sales trading and management to our rapidly expanding company, and he will have a key role in building our trading desk and sales relationships,” says Hall.
Cashel, who reports to Hall, was most recently with ABN Amro, where he was senior managing director and head of equity sales, Americas. Before that, Mr. Cashel was a principal at Morgan Stanley Dean Witter. While there, he headed Emerging Markets Sales Trading (NY), Non Japan Asian Equity Sales Desk (NY) and Emerging Markets Equity Sales (London).
Reporting to Cashel at Harborside+ are Michael J. Earlywine, head of trading; David Leone, vice president, marketing; Seth Gelberg, vice president, technology & CTO and; John Malik, vice president, product development.
Harborside+ melds the best of technology and human intervention, so that buyers and sellers can find each other and successfully complete a transaction quickly, efficiently and without market disruption. Traders submitting IOIs to Harborside+ only indicate side (buy or sell) and symbol. Unmatched IOIs are not seen by anyone, including the Harborside+ trading desk. Buyer, seller and Harborside+ trading desk are electronically alerted once the system finds a match, whereupon the service switches from technology to human expertise. The Harborside+ trading desk assists counterparties in finalizing the transaction, through phone-based communication that keeps identities of the buyer and seller confidential. Trades are executed by Harborside Securities, a totally independent registered broker/dealer. Harborside+ is not an ECN or an ATS.