A group former New York Stock Exchange floor traders are prepping their maiden hedge fund for launch on Nov. 1. Long Island, N.Y.-based EW Trading is preparing to unveil its ExSpecialist Fund, which will trade equities using computer-driven models.
The day-trading fund employs a long/short trading strategy, according to co-founder Chris Dearborn. “It’s algorithmic, IT trading with former specialists from the NYSE floor taking the point of entry into the stocks,” said Dearborn. “It’s not a black-box strategy because we find picking the point of entry as the most crucial point to it. Anybody can have an algorithm but the only control you have over is the opening and the close with stocks fluctuating more than ever before.”
According to Dearborn, the fund abides by three principles. It will hold 95% to 100% of its assets in cash at the end of the trading day, because “we were all down here at 9/11 and you never know what’s going to happen.” The fund will also not trade outside the average quoted size of the stock because “you don’t want to be a market mover, you want to become part of the trend,” and will seek to trade without emotion.
Dearborn and his partners, Roland Cozzolino, Scott McMahon and David Silber, are currently raising capital from friends and family. The fund charges a 2% management fee and a 20% incentive fee.
“All of these very talented specialists on the floor are now looking to start hedge funds and we have seen a few like this now and expect there to be more,” said a source close to the firm.
The fund uses Shoreline Trading Group as its prime broker and Goldman Sachs as its custodian.