Foreign exchange
THE BENEFITS OF GOING
IN-HOUSE
David Ketley , head of dealing , Harmonic Capital
Founded in 2002 , Harmonic Capital believes in doing things in-house – a reflection of the idea that the buy side should take control of its own destiny . Yet this is not a free-for-all . David Ketley , head of dealing sees his role as something similar to a pilot , an aircraft through potentially turbulent skies to a target destination . That destination is decided by the firm ’ s computer models , built by an in-house research team . “ My role is to manage the execution of trades that the models give to us ,” he told the Buy-side Perspectives . “ As traders , we get involved in sourcing the data that feeds the models and looking at which instruments to trade . But the core is with the research team . As for execution , the priorities involve hitting the right liquidity , the right venues and counterparties .” Ketley joined the company ten years ago , in 2007 . Working his way up through the company , he has been head of trading since October 2014 . Harmonic Capital employs an investment philosophy that has been consistently developed and applied since the firm was founded in 2002 . Specialised in spread based trading strategies , the aim is to provide uncorrelated absolute returns in all market conditions . For example , Ketley describes the firm ’ s approach to analysing pricing as “ very quant ”, a term sometimes associated with high-frequency traders . Yet Harmonic Capital is emphatically not an HFT business – on the contrary , Ketley states that slow and steady is more the firm ’ s style than an aggressive intra-day approach , and points out that Harmonic Capital tends to hold positions “ for a long time ”, adding that the firm finds a more passive trading approach to be appropriate for its goals . Perhaps the single most distinctive feature of the firm ’ s approach is the fact that it uses so much in-house technology , rather than relying on brokers or third-party tools . “ We do the vast majority of our FX trading via a home built FIX API ,” said Ketley . “ We have direct lines and we have an in-house pricing system . The advantage of doing that way is it gives us a lot of control over the data . We harvest data on spreads and look at it over bespoke periods , by size bucket , currency pair and component we can really tailor it to suit our needs .” As with any decision , there are advantages and disadvantages to this approach . Selecting in-house solutions does provide the ultimate control ; the down side is that
“ As traders , we get involved in sourcing the data that feeds the models and looking at which instruments to trade . But the core is with the research team . As for execution , the priorities involve hitting the right liquidity , the right venues and counterparties .”
when a change needs to be made , whereas with a ‘ plug and play ’ system it could be done very quickly , a custom-built system may take longer .
32 www . buysideintel . com March 2017