Tag Archives: agency-only broker

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Fortune CEOs Take Unequivocal Stand; This BD Bids On

Taking a Unequivocal Stand is Easier for Fortune CEOs than for POTUS–so it seems. Fortune 500 CEOs who have taken exception to erratic and equivocal statements made by the current sitting president of the United States have been systematically subjected to ‘assault by Twitter’ by the country’s CEO-in-Chief. In turn, their company’s share prices have suffered from sell-offs, as investors fear the “wrath of Trump” will extend to federal government actions intended to harm those companies who have failed to heed Mr. Trump’s so-called “lectures.” Attacks and Counter-Attacks via Twitter has become a contact sport, all thanks to “POTUS.”

Within the context of Wall Street firms, “un-biased and conflict-free” are two phrases that agency-only broker-dealers advance on a continuous basis. These phrases connote their conforming to a fiduciary posture that is intended to protect the interests of their client above all else. When it comes to political discourse, most broker-dealers are loathe to insert themselves in a political fracas, yet other BDs are run by folks whose moral compass overrides their need to keep quiet, regardless of the risk that a regulatory agency such as the SEC or FTC (overseen by Congress) will , at the urging of Mr. Trump, exact some type of revenge for challenging the current president. Courtesy of BrokerDealer.com Editorial Section, MarketsMuse editors join those who are taking the high road, and in that effort, we’re re-distributing a piece that profiles a unique broker-dealer’s viewpoint expressed via trading desk commentary and distributed to their Fortune treasury clients and the leading Wall Street ‘book-runners’. We’ll defer to our readers to click on links leading back to the minority broker-dealer in question. Hint-the firm is the oldest minority broker-dealer owned/operated by Service-Disabled Veterans.

A Special Editorial from BrokerDealer.com: Most Fortune CEOs, as well as leaders of Investment Banks and Broker-Dealers (aka BD) are typically loathe to take a political stand. For the former, making pronouncements that will raise the ire of the current president are likely to be met by “injury by twitter,” or worse still, federal agency scrutiny of the company, which could prove devastating for public company shareholders. For the universe of corporate leaders with a conscience and also recognized thought-leaders, only a few have yet to prove unequivocal when reacting to the equivocal comment made by President Trump when framing his first view of what US Attorney General Sessions labeled as a”domestic terror event.” We’re referring to the white supremacist rally that led to 3 deaths and multiple injuries in Charlottesville, VA this past weekend.

For investment banks and broker-dealers, let’s face it-politics and business mix best with each other when done over cocktails or discrete ‘off-site’ meetings to discuss new capital market initiatives, deal issuance and/or asset management mandates. After all, most traditional broker-dealers eschew taking a political stand that opposes the federal government administration, simply out of fear that the long lips of the current WH CEO will whisper to administration-appointed SEC bureaucrats with a message akin to ‘the right industry regulator might want to make this [firm] go away..” Most, but not all is the catchphrase that compels a re-distribution of a capital markets desk commentary that focuses on fixed income markets and along with a smidgen of geopolitical observations and delivered to a captive group of leading Fortune 500 corporate treasurers, as well as a select group of sell-side syndicate desk ‘book-runners’.

Sponsored by Prospectus.com. Our team of capital markets experts and securities lawyers specialize in preliminary offering prospectus, secondary offering prospectus and full menu of financial offering memorandum document preparation. More information via this link

Here’s the extract of the day’s piece, titled “Risk On, Risk Off, US-NOKO Tensions Subside; Ugly Heads of Racism Take Top Headline…”

Investment Grade Corporate Debt New Issue Re-Cap – A View About Charlottesville and the Aftermath

Risk was clearly back on in the financial markets today, as U.S./NOKO tensions fell to the wayside.  Unfortunately prejudice and racism reared their ugly heads in the Charlottesville, Virginia riot over the weekend.  On Monday, Fortune 500 thought leaders Ken Frazier, CEO of Merck & C0., Brian Krzanich, CEO of Intel, and Kevin Plank, CEO of Under Armour each took a stand by protesting the ‘equivocal’ comments made by President Trump in his first response to the domestic terrorism acts in Charlottesville, which were advanced by self-proclaimed alt-right and white supremacist neo-Nazis.  Mischler Financial Group  stands with every corporate executive (and every duly-elected or duly-appointed government official) who stays true to genuinely right-minded beliefs and applauds their respective organization’s dedication to doing right by doing good. In case you missed the memo, many of America’s Fortune corporations adhere to this same notion and advance their commitment via proactive Diversity & Inclusion initiatives.

 

For those corporate executives who may have spent all of their undergrad time in finance and accounting classes, and for those who are perhaps not as familiar as they could be i.e. American History (let’s not forget to mention world history, too!), racism and bigotry are diseases that spew hatefulness and cannot be allowed in a free and democratic society. The incendiary and incite-full actions for which the various white supremacist and KKK groups are notorious for, are NOT protected by “First Amendment rights.* These are cancers that cannot be discounted or condoned via equivocal platitudes; simple right-mindedness demands they be eradicated.

(*Think Justice Oliver Wendell Holmes Jr i.e. Schenck v United States and also re-visit Brandenburg v. Ohio)

 

To the above point, one need only re-read the Constitution and the Bill of Rights to appreciate that D&I is part and parcel to our country’s DNA. It is also part of the cultural foundation of many Fortune 500 corporations, including Intel, including Merck, including Under Armour and including many others! D&I infers respect for and appreciation of differences in ethnicity, gender, age, national origin, disability, sexual orientation, education, and religion. But it’s more than this. We all bring with us diverse perspectives, work experiences, life styles and cultures and we presumably all share a disdain for anyone and any group that attempts to dismantle, disrupt and or destroy. Kudos to Mssrs. Frazier, Krzanich and Plank for putting themselves in harm’s way and risk of “injury by Twitter” for being true leaders and staying true to their convictions and their constituents.

 

Kudos also to the many Fortune executives who have raised their own voices to advocate on behalf of right mindedness, and to those corporate executives such as Jamie Dimon, CEO of Citigroup, who have opted not to resign their volunteer roles serving on “Presidential Councils” in protest to seemingly wrong-headed rhetoric. One can hope they have chosen to remain in their roles so that they can be that much more proactive in their WH-appointed roles and/or similar presidential councils in which they serve as volunteers. These are jobs these business leaders have [presumably] accepted to better the country, not to help advance any political platform or political agenda. How the US Secretary of the Treasury or the Director of the National Economic Council can square the so-called ‘equivocal’ views expressed by the CEO-In-Chief vs. their own cultural beliefs will likely be subject to ongoing self-reflection, external speculation and spirited debate. These are smart folks and optimism demands these administration officials be given the benefit of the doubt, just as it is incumbent on any/every corporate leader to serve as role models for employees, customers and clients; just as right-minded parents do for their own children.

 

Today’s VIX closed 3 bps tighter versus Friday’s close. Also a reminder that tomorrow is August 15th – “mid-August” – that’s when North Korea’s illustrious “bad boy” proclaimed that he’d have his master plan ready to bomb Guam developed by.  One week from today on Monday, August 21st begin joint U.S-South Korean military exercises referred to as Ulchi-Freedom Guardian. The exercise began in our Bicentennial year of 1976. North Korea has annually perceived the joint exercise as “preparation for war.” It is the world’s largest computerized command control implementation. Up to 80,000 American and South Korean troops have participated in this exercise in the recent past.  The game will go on for two weeks before concluding on Thursday August 31st.  Enjoy the show Mr. Jong-Un. You’ll have front row seats though I recommend binoculars. Here’s lookin’ at you kid!  To continue reading the day’s debt market commentary, click here

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Trading Ahead: Dark Pool Operator ITG Gives Itself Best Ex and Gets $20mil Fine

According to the BrokerDealer.com blog, MarketsMuse reports that “dark pool” operator ITG and its agency-only, best-ex, ‘conflict free’ brokerdealer affiliate AlterNet Securities appear to have been providing themselves with best-ex by capturing order information from ITG institutional customers and for that, they will pay  a record SEC fine of $20.3 million to settle charges that they operated a secret trading desk, the U.S. Securities and Exchange commission announced this week.

As described the SEC — and, unusually, admitted to by ITG ( ITG, -4.29% ) — there were two main charges — that the company operated a proprietary trading desk when it claimed to be “agency only,” and that it then used the confidential trading information of its dark-pool subscribers without disclosing that.

The regulator “found that despite telling the public that it was an “agency-only” broker whose interests don’t conflict with its customers, ITG operated an undisclosed proprietary trading desk known as “Project Omega” for more than a year.”

On Monday, ITG CEO Bob Grasser stepped down to be replaced by E*trade veteran Jarrett Lilien in the wake of the scandal and news of the SEC’s proposed fine. ITG General Counsel Mats Goebels also resigned, according to news reports.

An SEC press statement added, “[while] ITG claimed to protect the confidentiality of its dark pool subscribers’ trading information, during an eight-month period Project Omega accessed live feeds of order and execution information of its subscribers and used it to implement high-frequency algorithmic trading strategies (aka “HFT”), including one in which it traded against subscribers in ITG’s dark pool called POSIT.”

BrokerDealer.com provides a global database of brokerdealers operating in more than three dozen countries throughout the free world. – See more at: http://brokerdealer.com/blog/#sthash.6VqFIQkG.dpuf

Unlike previous SEC settlements where the accused pays a fine and does not admit any guilt, ITG admitted wrongdoing. Further, it will “pay disgorgement of $2,081,034 (the total proprietary revenues generated by Project Omega) plus prejudgment interest of $256,532 and a penalty of $18 million that is the SEC’s largest to date against an alternative trading system,” according to the SEC. 

For the full story from BrokerDealer.com, please click here

 

agency only executing broker

Agency-Only Executing Broker: What Does Best Ex Mean?

MarketsMuse dip and dash department frequently prefers spotlighting altruists and do-gooders, including Agency-only execution firms in the brokerdealer sphere who, unlike “principal trading desks”, do not take the contra side to institutional customer orders as a means of making a profit; agency-only firms merely execute those client orders via the assortment of major exchanges and dark pools that traffic in equities and equity options. Today’s spotlight is on Dash Financial; the only position they purportedly take is a business model position by promoting the fact they act as a conflict-free agent only representing the best interest of their institutional brokerage clients in consideration for an agreed-upon commission.

The phrase “Best Execution” is therefore popular jargon among agency-only firms and implies that customers are receiving ‘the best” execution. What that means is a function of who you ask, particularly when considering the brokerdealer community has proven uniquely adept at capturing hidden revenue via rebate schemes in consideration for orders routed to those respective venues for execution. These schemes are aggressively promoted by the nearly two dozen major exchange and dark pools that facilitate trading in equities and equity options.

Courtesy of our friends at FierceFinance, today’s altruist of the week award goes to equity and options market agency brokerage Dash Financial, who asserts that being a broker in today’s fast-paced market is about being a technology expert and a consultant on clients’ execution objectives.

Below is the extract from FierceFinance’s interview with Dash Financial’s CMO:

David Karat, Dash Financial

“Everything is a tradeoff,” said David Karat, chief marketing officer for Dash Financial. “Every action you take to minimize fees, you risk losing liquidity, and for every technique to maximize liquidity it will cost you more money because it will be less relevant which venues you go to get that liquidity. It’s that balance we sit on top of and consult with our clients on.”

To that end, Dash Financial aims to help clients achieve what it calls on best net execution – execution that incorporates exchanges fees and all other associated costs.

“If there is liquidity in multiple places we are going to capture that liquidity based on the cheapest economics for the client,” Karat said. But Dash Financial has also designed its tracing architecture to couple its best execution algorithms with a focus on in-depth transparency, Karat said.

“We actually want you to see all the child orders, the millisecond time stamp of which destinations we are going to and what happened,” Karat said.

Looking at an example of a client order to sell 1000 Apple May 106 puts at seven cents, Karat notes that the system not only shows that the parent order was filled, but allows clients to click through to see all the child orders associated with that parent order.

In the Apple example, there were actually 828 contracts available to satisfy the order, divided between two different venues. Dash Financial’s platform is calibrated to account for slight differences in the amount of time it takes for orders to reach different venues, and that calibration readjusts during the day as timing slows down or speeds up. After capturing all 828 orders, the millisecond that the system realized a balance remained, it reversed and posted the balance of the order to Arca, because Arca has the best rebates. The order on Arca was hit immediately.

The Dash Financial interface not only allows clients to see the child orders, but through a tool called Order Trace, clients can view everything including FIX messages sent down to the exchange for a complete audit trail for compliance purposes. In addition, a tool called a Smart Order Router Analyzer allows clients to view what Dash saw on screens at the time or the order.

Dash Financial sees its role as using its tools for visibility into execution to work with clients fine tune trade executions to fit the nuances of their strategy.

“What we do is look at that behavior when they are executing and we might say, in this type of scenario, it might make sense to be a little more aggressive, or a little less aggressive and this is what we suggest,” Karat said. “We will go back and redesign how the algorithm behaves in a certain situation or we will give them another algorithm for a specific nuance, and compare it against existing behavior so we can quantify whether it is worth changing again or keeping as it is.”

 

Best ETF Market-Making Award Goes To..

In coetfcomlogonnection with the 1st Annual ETF Awards hosted by ETF.com, the world’s leading authority on exchange-traded funds, agency execution firm WallachBeth Capital was selected “ETF Market- Maker of the Year” by a panel of judges representing prominent firms from across the ETF industry. The announcement was made during a gala dinner held on March 20th at New York’s Chelsea Piers and attended by more than 300 industry members.

According to ETF.com Founder and CEO Jim Wiandt, “The award to WallachBeth for market maker of the year recognizes the firm that has done the most to improve investor outcomes throughout education, support, services, innovation and outreach.” Runners-up for the category included Citigroup, Goldman Sachs, Jane Street Capital and KCG. A total of 23 categories were voted upon by the ETF.com judge’s panel.

In making the award, the ETF.com judges noted, “While many firms share credit for helping ETF investors understand ETF liquidity, few have been more dedicated to the task of educating clients and improving outcomes than WallachBeth. The prototypical agency broker, it uses strong Street connections to source liquidity for clients, allowing the world’s best market makers to compete for each order. The agency approach—where WallachBeth is always on the side of the client—resonates with advisors, who often need hand-holding when they enter the fast-moving world of ETF trading.”