Lime Branches Out

Lime Brokerage is poised to take advantage of the rapid growth of high-frequency trading, broadening its stable of products and introducing new ones to meet the need. By Rob Daly

The growth in high-frequency trading (HFT) is about to bear fruit for New York-based agency broker and technology provider Lime Brokerage, as HFT firms continue to sprout up across the industry.

Jeff Wecker, president and CEO of Lime Brokerage, attributes the growth to high-frequency traders leaving their existing positions with sell-side proprietary trading desks and multi-strategy trading firms and seeking new opportunities.

"There has been a migration taking place in high-frequency trading," he says. "We have seen a growing number of sole proprietorships and people leaving high-frequency trading firms and going out on their own." These new firms, adding to the number of existing clients, seek to deploy their HFT strategies in new markets and in novel ways, leading Lime to expand its offerings to meet the new demands.

Going beyond the popular low-latency offering to the US cash equities market, Lime has made a large commitment to deliver its HFT offerings for the US equities options market, as well as new trading algorithms. Lime plans to reveal more in a series of announcements over the coming weeks, according to Wecker.

"We are being asked and we are complying with those requests for low-latency data and execution services in other asset classes and regions," Wecker says. "We are offering a broader array of those offerings to our customers."

One example of where Lime has seen an uptick in client interest is in improved co-location service. "We already have plans to roll out a co-location framework for all US options exchanges," Wecker says.

The firm has filed and received a number of patents for providing co-location services and executing the recently proposed regulations by the US Securities and Exchange Commission (SEC) regarding pre-order validation by brokers for all their customers.

Leveling the Field

While many industry participants see investing in the necessary low-latency infrastructure to support HFT as a game only for those with the largest IT budgets, Lime takes a slightly different view.

"We expect that while this is broadly true, we consider ourselves among those firms with deeper pockets due to the years of investment that we have made in our platform," Wecker says. But Lime sees itself as a technology and services provider to buy-side and sell-side firms first, and an agency broker second.

"We are an engineering firm that operates a broker-dealer as a managed service on behalf of our customers," Wecker says.

As a result of this business strategy, the firm has shied away from commercially available technology that doesn't meet Lime's required levels of quality and performance for data provision, executions, order routing and risk aggregation.

"We are open-minded to technology solutions and equipment from a host of technology providers. When it comes to the execution and data provision, it has historically been homegrown," Wecker explains.

Lime has leveraged its infrastructure investment to create offerings for the buy-side and sell-side communities.

In the coming weeks, Lime expects to announce an expansion of its Virtual Brokerage service, which gives third-party brokers the ability to have their clients directly plug into the Lime trading system. Currently, a few unnamed clients have implemented the new capabilities as part of a soft launch, Wecker says, adding that the new offering will first be available for the US equities market before branching out to other asset classes.

The soon-to-be-launched technology is different from what is presently used. "It is a variant of that technology that goes well beyond what we offer to the customer today," Wecker says.

Looking to the future, Wecker sees several new opportunities for Lime and its offerings, including the possibility of breaking up its core offering of data provision, executions and order routing, as well as risk aggregation, into separate offerings.

However, too many clients tend to take the complete package since it provides them with what they need to compete in the market, according to Wecker. Offerings like the one that will address the proposed SEC rules on "naked" access would involve the execution service as well as Lime's risk aggregation service, he adds.

According to Wecker, the most difficult challenge facing HFT now and in the months ahead is the public and political misperceptions surrounding it. He attributes much of this to the number of HFT firms that have historically avoided the spotlight. The recent actions of various members of the US Congress as well as the discussion at the SEC has created a number of public misconceptions of what high-frequency traders do and what service they provide to the marketplace, he says. The greatest challenge for this community is to be able to accurately tell their story so that people understand that they are an essential part of today's market ecosystem, he adds. -->