When a US options prop shop built a new fast-track strategy development platform, its business model changed overnight. Tom Heffernan, Director, Global Marketing, Last Atlantis Capital Management, explains why the alternative asset manager encourages emerging trading firms to leverage its technology to perfect their own models.

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How has Last Atlantis's business model evolved from inception to the present day?

Last Atlantis originally started as a proprietary options trading shop back in 1999. We were primarily involved in high-speed arbitrage trading using US exchange-traded equity options.

As our primary playground was the US equity options markets, we experienced a rapid succession of changes at the exchange-level, including the introduction of new technologies, operations and pricing mechanisms. As a result, the strategies that had been profitable when we started eventually lost much of their edge. So to survive in this rapidly changing marketplace, we set out to develop a very robust technology infrastructure which would allow us to shorten the timeline for strategy and model development to accommodate changing conditions and improve our capture capability of opportunities through higher-speed data scanning.

How did this change your business model?

Once we built these systems, we realised we had developed a formidable, highly scalable infrastructure that could be applied to more than our proprietary business. We also recognised that the rapidly changing nature of the equity options markets may force – as it did – many other proprietary options trading firms to alter their business models. So we chose to diversify our business by leveraging new partnerships and our existing resources to a develop new revenue stream. With the technology and strategy development team from our prop business, we teamed up with Stig Ostgaard, an original Richard Dennis ‘turtle’, and Irwin Berger, both formerly of Sjo, to launch our alternative asset management firm, Last Atlantis Capital Management (LACM).

“… we’re driven by opportunities presented from both sides: small funds and independent traders with potentially good ideas; and institutional investors who are seeking specific investments…”

Through LACM, we’ve developed a master feeder fund structure which allows us to introduce new strategies within our primary fund without any cross-liability between the individual strategies. The concept uses a Delaware Series LLC for our on-shore feeder and a BVI Segregated Portfolio Company (SPC) as its off-shore counterpart. The structure provides the flexibility critical to our mission. It allows us to better leverage the investment in our development platform by making it available to emerging traders with good ideas but without the infrastructure to test and validate them. ...

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