Sterling Trading Tech (STT) discusses their Risk & Margin System at FIA Boca 2023

The Futures Industry Association (FIA) welcomed the global derivatives industry to the 48th annual Boca International Derivatives Conference, held on 14-16 March in Boca Raton, Florida.

FIA Boca 2023 attracted more than 40 exchanges and trading venues as well as regulators looking to take the pulse of the industry as trading volumes in global exchange-traded derivatives rose by 34%, printing a new record for the 4th consecutive year.

STT offers trading platforms, OMS, and risk products

Among the attendees were representatives of Sterling Trading Tech (STT), a provider of trading technology solutions (OMS, Risk & Margin and trading platforms ) for the global equities, options, futures, FX, and Crypto markets. Sterling currently serves more than 100 clients including leading brokers, clearing firms, and prop groups, in more than 20 countries.

STT was present at FIA Boca 2023 after a year of siginificant change, including the additions of President & CEO Jen Nayar in September and Board of Directors member W. Brennan Carley in October. Jeff Marston also joined the firm as Chief Technology Officer in June.

Sterling began 2023 in the same vein, announcing the appointment of Keith Cacciola as Chief Customer Officer to lead Sterling’s account management team, working closely with clients who count on STT for their trading technology solutions. He joined Sterling Trading Tech after working at Eventus, Vela and NYFIX (now part of Broadridge).

Cacciola was at the FIA event with Andrew Actman, Managing Director Of Business Development, who has been with the company since 2017.

FinanceFeeds Editor-in-Chief Nikolai Isayev spoke with both Cacciola and Actman about STT’s competitive advantages, the challenges clients face today, the firm’s product roadmap and the new leadership at STT.

STT’s average client tenure is north of ten years

Cacciola’s previous experience at Eventus, Vela, and NYFIX, puts him in a unique position to talk about STT’s main strengths, but is also a reminder of his veteran status in the industry. “I feel old”, he joked as he pointed out his and STT’s “domain expertise” as a key advantage against competitors. The firm has been around since 2001 and the average tenure of clients is north of ten years, “a testament to the value they find in our products, industry experience and knowledge.”

Sterling Trading Tech has participated in the evolution of the financial industry across the past two decades by staying “highly customizable and dynamic in both its technology and approach to customer service,” Cacciola said. STT has been there for its clients as the industry moved from building proprietary technology to buying SaaS solutions, and he now sees a move toward a “build AND buy” approach when it comes to technology.

As a technology partner, we make a point to ask a lot of questions, he added, in order to understand the challenges clients face, identify the gaps in their technology and offerings to their own clients, and to be able to address clients’ short and long term goals.

Risk & Margin System for risk calculations in equities, options, futures, FX, crypto

For 2023, STT has seen the explosion in option trading volumes and the rise of volatility drive adoption of their risk and margin platform. The Sterling Risk & Margin System (SRM) offers advanced analytics as a RaaS (Risk-as-a-Service) solution, covering global equity, equity options, and equity futures markets for risk calculations.

The SRM uses quantitative and big data techniques to manage risk and monitor margin in real-time, calculating risk scenarios, stress tests, portfolio margin, risk-based haircuts, maintenance margin, and Value at Risk (VaR) for each account, with the capability to add and handle firm-specific house rules. The firm has recently added the FX and Crypto asset classes to its risk and margin system, providing a new level of multi-asset risk coverage for clients.

STT is committed to pioneering innovative solutions to help clients for both pre- and post-trade said Cacciola, who added that the company’s Chief Product Officer, Ravi Jain, has released a few white papers on the matter (see here for the latest and for all STT news and insights, click here).

“The one constant is change, and STT does a good job at staying ahead of the curve, anticipating problems in the capital markets and developing solutions,” said Cacciola, pointing to the real-time feature of its SEM (Risk & Margin Solution) as a good example.

The one constant is change and in-house development lags behind

Actman, STT’s Managing Director Of Business Development, also noted that the firm’s product roadmap can change quickly to address emerging needs of clients. An example of this is how the firm’s Brazil-based customers rapidly shifted focus from US equities and options to fixed income and mutual funds in recent months, given rising interest rates.

In such situations, Do-It-Yourself (DIY) and cost-efficiency are mutually exclusive, Actman said. “In-house development and roll-out can be very slow and hurt a trading firm’s core business. That’s where STT steps in and brings value. We try to provide solutions that make their operations easier. STT clients find us to be reliable, stable, customizable, dynamic.”

For many firms working with legacy OMS solutions built specifically for equities, adding capabilities for options trading presents quite a challenge. For example, calculating pre-trade margin for options is oftentimes too sophisticated for an in-house development team.  Ensuring their systems are always in compliance and keeping up with shifting regulatory requirments can also be burdensome for some trading firms.

An example is FINRA’s recent changes to the rules for the “pattern day trader” – The rule previously allowed traders to request the reversal of the PDT Requirement after exceeding the threshold every 90 days, where now the new rule states that it can only be reversed once in the lifetime of the account. Our OMS assists firms adapting to this change by providing alerts when an account is approaching the PDT threshold, which allows firms to communicate with clients in real time of this potential PDT requirement reached, Actman explained.

“If it ain’t broke, don’t fix it”

Cacciola also took the opportunity to praise President & CEO Jennifer Nayar for raising the bar high since she joined the company last fall.

“Maybe because of her British sensibility or her East End of London upbringing, she has a very logical and pragmatic approach to running a shop. She would never ask somebody to do something she wouldn’t do herself,” he said.

But the new additions to Sterling’s executive leadership team does not mean the firm intends to change its value proposition. “If it ain’t broke, don’t fix it,” Keith says.

Instead, the new leadership is building on what has made STT successful, adding perspectives and ways to solve client’s challenges as they expand their offering to new asset classes, new clients and new regions.