CASE STUDY Brokerage & Trading


A top tier investment management institution

The Opportunity

“Commercialize a new exchange traded security product for actively managed funds.”

Key Challenges

  • Eliminate significant structural costs that erode returns for actively managed mutual funds.
  • The security product design needed to provided in-kind redemption capabilities to avoid flow-related tax realizations for investors.
  • Establishing the trading marketplace – how do we engage with market makers, exchanges, and broker-dealers to insert this new trading protocol into their existing systems and processes?
  • Ensuring trading confidentiality – how do we create and commercialize trading baskets which protect actively managed funds from having their daily trading patterns exposed?
  • Mediating data flows – how do we introduce new exchange traded data paradigms into existing mutual fund data services to support an actively managed, exchange traded fund?

Our Role

  • We partnered closely with executive management to develop the commercialization strategy and execution plan for the new exchange traded security product.  
  • We also worked closely with key marketplace participants, including exchanges, market makers, and broker dealers to identify key process and technology platform changes which would be required to support the new trading protocol.
  • Based on our discovery work, we created the detailed trading processes and technology specifications to support end to end trade execution for this new security type.    
  • We developed an in-depth playbook for market participants to leverage in their own preparation for trading in the new protocol design. 
  • We also worked closely with early stage broker-dealers and market makers to prepare their operations and systems environments for trading in exchange traded managed funds.

Bottom Line

  • The new exchange traded mutual fund products have become an impressive market success. 
  • The new trading protocol eliminates more than 79 basis points in structural costs, which help licensed fund managers exceed their most aggressive benchmarks. 
  • The new security product design is helping level the playing field with passive strategies, while protecting portfolio trading confidentiality.  
  • Market makers are finding that the new design provides a simple, reliable market opportunity, with no intra-day hedging required. 
  • Investors are achieving better performance and improved tax efficiency.