Institutional trading platforms have become increasingly popular for companies and financial institutions of all sizes to access global markets. These platforms offer a range of features that allow users to streamline their trading activities, such as direct market access (DMA), order execution, and back-office solutions. They also offer advanced analytics capabilities, allowing users to make informed investment decisions.
In recent years, there has been a massive surge in demand for institutional trading platforms due to their cost-efficiency and flexibility. These platforms provide a secure environment for executing trades with low transaction costs while offering a wide range of features such as integrated portfolio management, real-time risk analysis, charting tools, and customizable alerts. Furthermore, they provide access to global exchanges, allowing users to gain exposure to different international markets.
One of the main advantages of using an institutional trading platform is that it allows users to stay on top of the latest market trends. By monitoring price movements across multiple asset classes in real-time, traders can quickly make informed decisions about their investments and take advantage of short-term opportunities that may arise. Additionally, these platforms can help traders manage their portfolios more effectively by providing sophisticated portfolio management tools such as automated rebalancing or investment optimization strategies.
Another benefit of using these platforms is that reliable customer support services usually back them. Any queries or problems encountered by traders can be quickly resolved without disrupting trading activities. Additionally, most institutional trading platforms offer educational resources such as webinars and tutorials tailored toward helping users develop their understanding of the markets and hone their skills as traders.
The technical infrastructure behind these platforms is also highly robust, with built-in security measures such as two-factor authentication and encryption protocols protecting user data from potential malicious attacks or unauthorized access attempts. Furthermore, some providers ensure low latency connection times so that trades are executed quickly without experiencing delays due to network connectivity issues or server downtime.
Overall, institutional trading platforms offer a comprehensive set of features that enable traders to make confident and profitable decisions when navigating the complex world of finance and investing. With increasing competition among providers coupled with technological advances, these solutions are becoming more powerful than ever and will continue to revolutionize how businesses trade in the future.
What are Institutional Trading Accounts?
There are two types of trading accounts offered on trading platforms – retail trading accounts and institutional trading accounts. Individuals can operate retail trading accounts, but such liberty is not valid when discussing institutional trading accounts.
Institutional trading accounts represent those that cannot belong to an individual, operated by companies, institutions that trade with significant capital, or other groups. Some institutions that use these trading accounts include banks, mutual funds, pension funds, hedge funds, and insurance companies. Both government and private institutions can operate these accounts. Hedge funds’ institutional trading platforms usually are internally developed.
Certain features can only be accessed if you are trading with a large sum of money. For example, features such as deep pools of liquidity, advanced platforms, and exceptional client support are offered to you when operating with significant funds.
The benefits of an institutional trading account are not limited to just the ones stated above. Unlike individuals operating retail accounts, these traders can enter their financial brokers’ real-time data using special APIs. Trading becomes an in-house operation with these accounts.
Major league companies and corporations choose institutional trading accounts because:
- First, they reduce the overall cost of trading.
- Second, they can trade more than one instrument in the market.
- Third, they get access to real-time data.
- Fourth, the execution time is reduced.
- Finally, they get the best price available.
The Best Institutional Trading Platforms
Big corporations like hiring third-party developers and using specially designed trading platforms with proper database management, trading engines, connectors to brokers/data feeds, order management engines, etc.
Here is a list of the best institutional trading platforms:
The trading industry pioneer and global leader in broker-neutral, execution, and order management trading systems for equities, foreign exchange, options, futures, and fixed-income securities.
- Trading Technologies – The company has existed since 1994 and offers technologies that enable electronic trading. Today, they set the standard for professional trading platforms.
- FactSet –
FactSet’s Execution Management System, powered by Portware Intelligence, enables rapid deployment of world-class equity and fixed income trading solutions from within FactSet’s front office workstation. Portware Enterprise helps the world’s largest asset managers and hedge funds manage the challenges of complexity and scale with embedded analytics, sophisticated decision support, and state-of-the-art automation.
- QuantHouse is an independent firm that has delivered advanced API-based algo trading solutions for the past 15 years to buy-side, sell-side, exchanges, and financial technology providers.
- Bloomberg terminal is a famous world terminal for trading, and some corporations use this platform. Read more about Bloomberg financial news.
- Fidessa – this platform executes orders from more than 100 markets and offers automated low-touch trading to complete order and risk management.
- Advent – Advent delivers technology solutions and services to financial services clients big and small worldwide.
- Systematics – Since 2008, Systematics has been a leading innovative one-stop shop for asset management and the algorithmic trading industry.
Difference Between Retail and Institutional Accounts
Both are trading accounts but differ significantly from each other. While we have already stated that an individual cannot access an institutional account, the differences are more profound.
Retail account holders do not get access to many features like IPOs. They have to pay a higher trading cost. This happens because retail traders have to pay a flat fee to their brokers. Since they mainly trade with limited shares in small caps, they spend more on brokerage than institutional account holders. As brokers do not get a massive commission, the account holders also bear the marketing and distribution charges.
The Advantage of Institutional Trading Accounts
There is no doubt that institutional accounts offer many advantages compared to retail charges. The main reason behind this is that the account holders trade large sums, and the frequency is also higher. In addition, since brokers make higher commissions on this account, the traders are offered numerous benefits.
Some of the significant advantages are as follows:
- You get an in-depth analysis of the market before trading begins. It allows you to tap into all the critical opportunities. As a result, the chances of missing a significant trend become small.
- You will be allowed to diversify your funds in different securities. You also get access to other exclusive financial instruments. Retail traders don’t get such facilities.
- Traditional accounts are generally given access to IPO investments, which is a huge game-changer.
- Brokers often let institutional trading account holders negotiate commissions and fees. Thus, traders get the best prices.
- The institutional account holders often impact the prices of shares as they deal in large volumes.
Verdict on Institutional Trading Accounts
There is no doubt that institutional trading account holders enjoy more privileges than retail traders. They often get better services and terms of trade. Along with the advantage of trading several securities, they get an in-depth data analysis, which makes tapping on the opportunities and existing trends easier.
They can connect with them faster than retail traders. Since their funds are enormous, brokers prefer to give them the best services to retain their clientage. With so many added advantages, there is no reason why a company or an institution wouldn’t opt for an institutional trading account.
How to become an institutional trader?
To become an institutional trader, you must have at least one certification from an international organization such as FINRA, CFA, NFA, IFTA, etc. In the next step, you must apply for a job position based on your experience. If you are a beginner trader, you can start as a financial analyst, junior trader, or quant programmer.
If you want to learn more about trading certifications, you can read the article.
Things to Check While Selecting an Institutional Trading Account
It would help if you kept a few things in mind while searching for the best institutional trading platform. We have listed some of them below:
- Ensure that the institutional trading brokers have been operating for the last two years.
- Institutional traders get the best customer support. So, ensure that your broker has sizable customer support to utilize this privilege. Also, check if they offer support services in your regional language.
- Never trade on a platform and with brokers who are not regulated. No matter how great the deals they offer to you, there is always a significant risk if they are not under any strict jurisdiction.
- Ask your broker how quick is their fund deposit and withdrawal services. 2-3 days of processing time is what you should aim for.
- Do your research and check if your broker has an international presence. Going ahead with institutional trading account brokers with a reputation to maintain will benefit you.
Comparing Different Institutional Trading Accounts
No account or trading platform comes with a 100% guarantee for success. Similarly, your institutional trading account is not your ticket to making a profit. Your strategy and other aspects play a significant role in defining how your trading journey will pan out. However, finding the best institutional trading account will swap many things your way.
Use the following guide to find your perfect institutional trading account:
- Their take on the use of technology
Technology is one thing that is constantly upgrading. If your account does not keep up with the latest technology, there are higher chances that someone else will overtake you in the race. Ask your broker before joining their platform about how frequently they update it.
- How established are they
Everything brand doesn’t offer you the best deals, but institutional trading platforms are not the case. These brokers have a reputation to maintain. Therefore, you are likely to get better service than the already established ones. If your broker has an international presence, this is an added advantage.
- Their customer base and staff ratio
Always do your research before hiring an institutional broker. First, collect information about how expansive is their customer base. Is it spread across different countries? Now go through their website and see how many employees they have. Sometimes, brokers take on more than they can chew. If their customer and staff ratio is inappropriate, you will not get the services you deserve.
- Commission and fees that you would be paying
You can never be transparent enough with your broker. While established brokers always discuss their fees and commission before beginning the process, you must take the initiative if they don’t. Keep it professional and discuss everything before you allow them to handle your trading account.
- The kind of customer support that you will be getting
Customer support is one of the perks of having an institutional trading account over a retail trading account. As you will be operating with a large sum, it is acceptable to demand more benefits. If you are not getting good customer care services, it is better to take your capital to a different broker.
- Who is regulating the accounts?
Never give even a single penny to someone whom you cannot trust. As an institutional account holder, you will be trading using a significant fund; you must be extra careful. Irrespective of how great the broker is or how advanced the platform is, nothing is worth it if a body does not regulate your broker with strict guidelines.