[ M A R K E T
way we look at trading, but the
most difficult is venue analysis and
order routing logic because of the
sheer amount of data and accuracy
needed to formulate a holistic view
of it,” Royal explains.
At this point it’s natural to
question the incentives, if any, for
brokers to provide data on such a
granular when the process has so
many barriers. Joe Hipps, manag-
ing director at Trade Informatics,
says there is not enough invest-
ment made in systems to make
sense of the data. “Considering the
fact there is a significant element of
complexity in interpreting the data,
the sell-side is not in a position to
decide what information is rele-
vant if nobody is going to use it.”
In recent years, asset managers
have shifted focus towards perfor-
mance and execution having been
driven by regulation like MiFID
II and best execution practices.
This shift has seen the buy-side’s
interest in exactly where brokers
are sending their orders grow
exponentially.
A N A LY S I S
|
S M A R T
TABB Group’s most recent
annual institutional equity trading
transparency report revealed 49%
of buy-siders are not satisfied with
transparency currently provided by
brokers. Of those, the majority cit-
ed order routing data as the biggest
area for improvement. A signifi-
cant 37% of those unsatisfied are
looking for further granularity spe-
cifically on routed order flow, order
placement and unfilled shares.
Dave Weisberger, head of equities
at ViableMkts, says unfilled order
information is imperative for asset
managers trying to analyse and
understand performance while
controlling the costs, conflicts of
interest and keeping in line with
best execution policy.
“Unfilled order information is
vital to the buy-side. The only way
O R D E R
R O U T I N G ]
to tell if an agency broker is oper-
ating in the interests of the client,
as opposed to collecting exchange
rebates for themselves, is to anal-
yse all the unfilled posted orders
to see if brokers have a pattern of
‘chasing the market’ that results
in opportunity costs to the client,”
Weisberger says.
“It is important since, on balance,
net of fees, the market should be
indifferent between posting and
taking, but brokers, quite often
don’t pass through either. Without
rebates or fees passed through,
therefore, firms will underperform
by posting instead of taking in the
aggregate,” he adds.
Creating real excitement
As full order routing transparency
continues to top the ever-growing
“It’s important to bear in mind the lack of
transparency allows brokers to make more
money.”
ROB MCGRATH, FORMER HEAD OF TRADING AT
SCHRODERS, NOW FINTECH CONSULTANT
Issue 53
TheTradeNews.com
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