Essentials of building your hedge fund

Author: Albina Zhdanova

Technology companies such as TFB that provide comprehensive solutions have the luxury of seeing the big picture: an overall market overview with an involvement in the internal processes.

And don’t let TFB’s company name fool you. Despite being called “Tools for Brokers”, we have also worked with technology providers, white label partners, and liquidity providers. More recently, we expanded our partnership with hedge funds and professional traders.

For years, we have observed that what has truly flourished is the evolution of traders. Today, a trader is more professional, has better analytical skills and tools, uses more efficient strategies, and possesses a better knowledge and understanding of the market.

Naturally, as traders were becoming more experienced and confident, they realised that it might be more feasible financially and strategically to pay for their own technology and have their own personal setup. This would eliminate the need for a brokerage as a part of the supply chain, and add more security and flexibility.

Filling the gap in the technical background

The reason why some traders don’t go ahead with this change is the lack of understanding of the technical side of the process. So, before we continue our discussion, let’s briefly look behind-the-scenes at what a hedge fund would need.

There are four key components to the chain:

  • Your strategy
  • Margin engine (platform)
  • The liquidity bridge
  • The liquidity provider (LP)

The trading strategy, often written for auto trading, sends commands to the platform. Usually, brokers would use MetaTrader 4 (MT4), MetaTrader 5 (MT5), or their own platform. Some brokers support trading via FIX API. Here you have to be careful as some FIX APIs stream to MT4 or MT5. It’s not a problem as such, but in this case, you will see an extra 5-10 milliseconds (ms) added to the execution time, as it will have to circle around a bit.

The order is sent to the liquidity provider via the liquidity bridge from the platform or the execution centre.

At this stage, traders should be attentive to whether the LP and the bridge provider have their own technology, are connected to the big banks directly, and have thorough regulations. Using your own technology is not a necessity, but it ensures the highest speed of execution, guarantees that regulations will protect you, and counterparts will provide an excellent data feed.

Bonus tips for hedge funds

We’ve prepared additional recommendations to help hedge funds avoid common mistakes:


It is important to sign up with the liquidities that are:

  • EU regulated. Don’t go for a cheaper option with offshore licences. It would not be worth it in the long run.
  • Have their own technology and do not run their own brokerage (that’s easy to check on the website). They might have a more strict KYC policy and require a higher deposit, but it will be worth it for a long-term partnership.


Even if you do not need to provide reports for regulators right now, you might have to in the future. And in that case, it is best to start running the reports sooner rather than later.

Also, you will need reporting to see the performance of your LPs, execution time, slippages, and tick data. This will give you more control and comfort. Modern reports are easy to run, and they show the tiniest details and dependencies, helping you run your company more effectively.

Connectivity Technology

Though you won’t need most of the things that brokers use, some systems are underestimated by hedge fund managers.

A great example of that is the monitoring system which makes sure all the prices are constantly streaming, the connection is there, and servers are up and running. If you are ready to have multiple LPs, you can schedule routing based on the trading strategy you have and analyse the LP qualities in terms of depth, average weighted price, and trading hours.

Again, the more data you have, and the more you can analyse it and apply the findings to your strategy, the more successful you can become.


PAMM (or percentage allocation money management) solutions are great for investors. You can bring your services to a new level by providing them with a user-friendly, comprehensive system to check how their investment is doing.

What can TFB do for you?

Tools for Brokers has been a trusted partner for hundreds of companies over the years. We strive to provide a high-quality custom service to each client we work with.

Here is what we can do for all aspiring hedge fund managers.

  • Professional technical support. We find that this is the most valuable point that we have to offer to hedge funds. Our 24/7 technical support team and relationship managers speak seven languages and are always ready to assist you. We are there to guide you through the abbreviations, complications, and all the unknown words.
  • Efficiency. We can offer what any hedge fund is longing for – a private setup, reduced speed of execution, and an individual aggregation pool. We have our own margin engine, which means that orders are sent to and calculated within one piece of software, which cuts precious milliseconds.
  • Stability. We have a real-time alert system and reaction plan to ensure your strategies are running each trading second.
  • Flexibility. The comprehensive product offering guarantees a solution for anything that you are looking for whether you use click trading strategy, HFT modules running via MT4, MT5, FIX API, or everything at once. We also support multiple types of instruments, such as FX, CFD, Indexes, Metals, Crypto, and Stocks. And you can manage it all within a single console.
  • The interface just looks good. It is modern, intuitive, and useful.
  • The network. As a benefit of working with TFB, whatever question or request you have, we most likely know the company or person who can help you. We’ve been here since 2010 and know the market well.

As a fund, you would probably prefer the most straightforward thing – just set up the platform and make a 1 to 1 setting with the LP. You don’t want to get into the details of settings of instruments, multipliers, filtrations, security setup, etc.

Trust us, we understand the pain and are ready to take that stress off of your shoulders. Send us an email at, and we will take care of the rest.

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