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UMA Trading Subcommittee
July, 2012
Kurt Salmon – Private and confidential, not for distribution
© Kurt Salmon 2010
Proprietary and Confidential
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Table of Contents
Overview
Trading Process for UMA
UMA Investment Roles
UMA Messages
© Kurt Salmon 2011
Proprietary and Confidential
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Overview
The following slides are based upon the discussions during the MASS UMA Trading Subcommittee meeting of June 22, 2012. They are intended to capture the sense of the
discussion and to serve as documentation of key concepts for use as references for
subsequent discussions. Additions and amendments are invited.
The objective of the meeting was to identify the types of messages and communication
between money manager and sponsor to facilitate UMA programs. The following areas are
offered to clarify discussions:
Trading Process for UMA
The trading process for UMA’s is distinct from that of SMA’s. Additional processes for
hybrid UMA’s, those with mutual funds or assets requiring different trade and/or data
flows should be developed. Points in the processes where messages should be
exchanged are suggested.
UMA Investment Roles
The responsibilities of each role differs depending upon the structure of the UMA
program and are presented by type of UMA.
UMA Messages
An initial list of UMA messages organized by business process is presented.
© Kurt Salmon 2012
Proprietary and Confidential
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Trading Process for Models-Only UMA
Manager
• Model Updated by
Manager
• Model Routed to
Program 1
• Model modified and
returned to Program
1
• Model Routed to
Program 2
• Model Routed to
Program 3
Sponsor of Program 1
• Model Received and
Acknowledged
• Model Reviewed
• Model Accepted or
Returned for
Modification
• Model loaded into
Rebalancing System
• Model used to
generate orders
• Orders routed for trading
• Executions returned
• Allocations to
accounts (AUM
affected)
Sponsor of Program 2
Sponsor of Program 3
Highlighted text indicates a possible message.
UMA Investment Roles
Type of Program
Models-Only
UMA Active
Models-Only
UMA Passive
Hybrid
SMA
Manager (1) (2)
Create/ Maintain Model
Create/ Maintain Model
- Create/ Maintain Model
- Create Orders
- Trade Away
(3)
- Create Orders
- Trade Away
- Route for trading, managing release
- Manage Allocation
(1) - A manager may participate in multiple programs
with multiple styles at the same or several sponsors
(2) - An advisor can provide models or portfolio
management functions within a UMA program, as
allowed
(3) - Models may be created, but are used to create
orders, not for distribution. The same models used for
an SMA may well be distributed for UMA programs
Overlay
- Review and approve models
- Modify models or incorporate into an overall model
- Generate orders and adjust orders for restrictions,
wash sales, etc.
- Route for trading, managing release
- Manage Allocation
Trading
- Receive orders
- Place trades
- Pursue best execution
- Process execution
- Inform Overlay
- Receive orders
- Place trades
- Process models using technology without modification - Pursue best execution
- Process execution
- Inform Overlay
- Receive orders
- Receive Orders and route for trading
- Place trades
- Receive completed trades done away
- Pursue best execution
- also functions for Models-Only programs
- Process execution
- Inform Overlay / Clearing Broker for away trades
- Receive orders
- Potentially could referee among SMA managers for a - Place trades
common client
- Pursue best execution
- Could be performed by the Advisor
- Process execution
- Inform Overlay / Clearing Broker for away trades
UMA Messages
Model-related
•Model enclosed – Manager to Sponsor
•Model received – Sponsor to Manager
•Model approved – Sponsor to Manager
•Model not approved – Sponsor to Manager
•Model implemented for next rebalance
•Changes to model used to generate orders (not full
rebalance)
•Substitution security
•Corporate Action instructions: apply to accounts and models
Trading-related
•Orders generated day/time for model
•Orders executed day/time for model
•Orders open (not executed) end-of-day
•Trading instructions (limit, portion out trade, etc.) – Manager
to Trader
•Amend order – not executed – Manager/ Overlay to Trader
•Order modified – Overlay to Manager
Special Requests
•Allocation change: raise/use cash
•Generate gains/losses
•Other
Manager Status
•Manager Style available
•Manager Style on hold
•Manager Style cancelled
Performance
•Assets Under Management – end of month
•Return – end of month
•Number of Accounts
Marketing
•Request investment commentary
•Programs/Products where model/style is in use
Contacts
R. Scott Quade
Manager
650 Fifth Avenue
30th Floor
New York, NY 10019
Mobile: +1 201 927 7673
Fax: +1 212 521 0201
scott.quade@kurtsalmon.com
www.kurtsalmon.com
Kurt Salmon, 650 Fifth Avenue, 30th Floor
New York, NY, 10019, USA
P +1 212 521 0221 F +1 212 319 9476
www.kurtsalmon.com
© Kurt Salmon 2012
Proprietary and Confidential
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