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expert view

MarketsMuse: This ETF Trading Expert Has This To Say About That…

MarketsMuse.com ETF update is pleased to share an informative perspective about best practices and “best execution” that institutional investment managers, RIAs and others should consider when using ETFs, courtesy of insight from one of the more widely respected members of ETF “agency-only” execution space. Here’s the excerpt of the ETFdb.com interview:

etfdb logoAll walks have come to embrace the exchange-traded product structure as the preferred vehicle when it comes to building out low-cost, well diversified portfolios. Furthermore, active traders have also taken note of the inherent advantages associated with the ETF wrapper, embracing the product structure for its unparalleled ease-of-use and intraday liquidity.

ETFdb.com recently had the opportunity to talk with Mohit Bajaj, Director of ETF Trading Solutions at WallachBeth Capital, about his firm’s role in the industry as well as the evolution of ETF trading in recent years.

ETF Database (ETFdb): What’s your firm’s story? What role do you play in the ETF industry?

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featured image jan 8 mm high-yield

Turm- Oil: Black Gold Turns to More than 50 Shades of Gray for High Yield Bond ETFs

MarketsMuse update on the downtick in oil prices and impact on high yield bond ETFs, including energy-sectory junk bonds includes extract from Institutional Investor Jan 7 coverage by Andrew Barber.

MarketsMuse editor note: The recent implosion of crude oil prices has triggered a conundrum for almost every investment analyst who prides themself on pontificating the domino effect impact on the broad universe of market sectors and asset classes. Much has been said about the how, when and where the trickle-down effect of the lower oil prices will effect corporate balance sheets, and in particular, those with a boatload of outstanding debt.  For high-grade corporate debt issuers, some believe lower energy costs bode will. For high yield bond issuers (companies that typically include energy industry players), the jury remains out for the most part. Experts that MarketsMuse has spoken with believe that if US drillers and frakers cut back on operations and reduce overhead quickly, it will help stem the burn that inevitably results from manufacturing a product that costs almost as much (if not more) to make as it what customers pay for it. Then again, as the supply begins to wane consequent to production cutbacks, market forces will, in theory, cause prices to rise..and those companies will be back in the black before having to sweat too much about interest payments on outstanding debt.

II logo

 

II’s coverage on the topic is framed nicely via this extract:

mcormond jan15 The impact of rising yield for energy producers on high yield markets has also spilled over into the exchange-traded funds and closed-end funds. “ETFs create a simple wrapper for investors to modify easily their exposure to high yield fixed income markets” says Andy McOrmond, managing director at WallachBeth Capital, a New York-based institutional brokerage that focuses on ETF and portfolio trading. Mohit Bajaj, director of ETF trading solutions, also at WallachBeth, notes that despite the volatility injected into the market for high-yield exchanged-traded products during the recent oil sell-off, short interest has remained relatively stable and borrows have been easily obtainable. Bajaj attritubes this stability to a maturing institutional appreciation of exchange-traded fund products.

 

For the full article from II, please click here

 

Agency BrokerDealer Enhances Offering for ETF Multi-Basket Trading

Below courtesy of Aug 6 edition of Wall Street Letter, article written by staff reporter Sean Creamer 

wslWallachBeth to enhance multi-basket trading

 

WallachBeth Capital, a New York City-based agency brokerage, will enhance its existing portfolio and multi-basket trading in exchange-traded funds and other equities to make greater use of OMEX Systems, according to executive members of both companies.

The firm currently uses OMEX for trading in equities, including ETFs, and options, as well as critical middle and back office functionality but it will take on additional functionality from the vendor in order to propel the firm even further into multi-basket trading, according to Michael Wallach, CEO.

“What we are doing with OMEX is attempting to customize the trading technology so that we can have enhanced pre-and post-trade abilities and analytics for multiple basket orders and portfolio management,” said Wallach.

David Beth, President, WallachBeth Capital
David Beth, President, WallachBeth Capital

David Beth, President and Chief Operating Officer at WallachBeth, noted that add-ons would bolster the current system used for trading baskets.

“We are looking for state of the art analytics, coupled and bolted to the [execution management system] for pre- and post-trade analytics, as well as including the ability for traders to quickly be able to change strategies or algos during and after executing an order,” said Beth.

In preparation for this change, last month the firm hired Matthew Rowley as its chief technology officer, a veteran of Crédit Agricole and Fidessa, who will oversee the firm’s technology push and to enhance existing applications.

Wallach noted that adding this functionality won’t be burdensome, but will involve a re-routing of some client network connections.

For the full coverage, please visit the Wall Street Letter website (subscription required, but FREE TRIAL is available)

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ETF Adoption Continues at Brisk Pace

marketsmedia logo  Excerpt courtesy of MarketsMedia

Providers of ETFs and mutual funds are using targeted marketing approaches to match the right products with the right customers.

With ETFs use climbing among active investors, both retail and institutional, packagers of ETFs view the product as a low-cost vehicle for investors to access alternative strategies such as those employed by hedge funds, many of which act as sub-advisers for the ETFs.

ETF use among registered investment advisors (RIAs) has grown nearly 27% annually over the past 5 years, according to research firm Cerulli Associates anticipates this growth to continue.

“The allocation to ETFs among RIAs grew 48% from 2011 to 2012,” said Kenton Shirk, associate director at Cerulli. “The RIA channel is an extremely attractive opportunity for asset managers.”

ETFs gained popularity as a cost-effective method to achieve diversification, but with increased adoption they have evolved to cover a wide variety of investment strategies.

“ETFs provide an easy way for managers to offer out products to alternative investors,” said David Beth, president and chief operating officer at WallachBeth Capital. “The ETF wrapper is very easy and transparent.”

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David Beth, President / COO WallachBeth Capital

Fund manager Direxion offers leveraged and inverse ETFs for active traders looking to execute short-term trading strategies.

“We consider ourselves a provider of alternative investment strategies,” said Andy O’Rourke, Direxion’s chief marketing officer. “We also have a few strategy-based non-leveraged ETFs that they have rules-based indexes, such as KNOW, which is an ETF that tracks the buying activity of corporate insiders on the secondary market.”

Direxion recently unveil a marketing campaign designed to inform experienced active traders about the potential benefits of the firm’s 3X leveraged ETFs. A departure from simply highlighting the flexibility of trading in either direction, the marketing campaign’s 60-second television commercial invites active traders to join “The Fellowship of the Bold.” Continue reading

2014 Wall Street Letter Institutional Trading Awards Goes To..

2014 wsl award logoBreaking News..New York, NY Feb 25 Latest Update: 9.45 pm EST

At a gala financial industry awards ceremony hosted by Wall Street Letter to recognize the year’s top investment banks, institutional brokers and trading technology providers, 300 of the financial industry’s senior executives gathered tonight to salute their peers in a best-in-class competition extending across 20 categories. Thanks to tweets sent from attendees during tonight’s dinner event, MarketsMuse is first to report the following announcements midway through the evening’s program:

Tom Quigley (l) WallachBeth Capital. MD/Electronic Trading Desk
Tom Quigley (l) WallachBeth Capital. MD/Electronic Trading Desk

Spotlighting one of the most talked-about service offerings in today’s brokerage industry landscape, in the category “Best DMA Offering,” agency-only execution specialist WallachBeth Capital took home the gold, with Bloomberg’s Tradebook and Object Trading receiving honorable mentions.   WallachBeth’s electronic trading/DMA group was launched in 2013 to complement the firm’s widely-recognized ETF, Options, Delta One trade desks and healthcare sector equities research team. The firm’s trading system technology platform is powered by OEMS solutions vendor OMEX Systems.

Sunguard Financial Systems, Instinet, Wolverine Execution Services, Tethys Technol0gies, Inc, Advent Software, Interactive Brokers, ITG Inc. and Bloomberg LP‘s Tradebook were among the other top contenders in several of the 20 brokerage and technology categories.

The 2014 WSL Institutional Trading Award for “Best Broker-Dealer/Research,” a new category that combined providers of equities research and fixed income content, Newport Beach-based Mischler Financial Group was selected best-in-class in which the 2 other contenders for that top spot were Stifel Nicolaus, the BD subsidiary of Stifel Financial, and investment bank Sandler O’Neil + Partners. Mischler Financial is a full service investment bank/institutional brokerage and the securities industry’s oldest and largest minority firm owned and operated by service-disabled veterans. The firm specializes in primary debt capital markets, fixed income syndicate market commentary and operates a 24/6 global institutional equities execution platform.

At press time, the winner of WSL’s 2014 Best Broker Dealer/Client Service was in the process of being announced. Contenders for this coveted award included BNP Paribas Securities Services, Northern Trust Securities, Sunguard Financial Systems, WallachBeth Capital, Bloomberg Tradebook and Mischler Financial.

Officials of Pageant Media, Ltd., the UK-based media giant and parent of Wall Street Letter announced the official listing of winners will be available at Wall Street Letter website.

ETFs Getting Blurry: New “ETMFs” Hard to See Through; Harder to Hedge

marketsmedia logo  Excerpts Courtesy of MarketsMedia

The lines of demarcation between actively-managed investment vehicles are getting fuzzier with the advent of non-transparent, actively-managed ETFs.

Black Rock, State Street, Eaton Vance and T. Rowe Price, among others, have filed applications with the Securities and Exchange Commission (SEC) to develop actively managed non-transparent ETFs that will disclose individual holdings every three months, just like mutual funds. These hybrid ETFs are also known as exchange-traded managed funds (ETMFs).

“What everybody is talking about today is non-transparent active ETFs, where a fund can change their basket all the time, and market makers don’t what their actual underlying stocks are,” said Phil Mackintosh, global head of trading strategy at Credit Suisse. “These active ETFs would look more like actively managed mutual funds.”

Mackintosh noted that these are different from transparent actively-managed ETFS. “There have been ETFs that pick stocks, which I would consider actively managed ETFs, for years. But these are transparent actively-managed ETFs, where the target portfolio is published daily and can be accurately hedged by market makers. Fund houses like PowerShares, WisdomTree as well as yield and volatility weighted ETFs offered by other providers are selecting stocks and stock weights based on specific factors that result in non-index weight portfolios.”

Mohit "Mo" Bajaj, WallachBeth Capital
Mohit “Mo” Bajaj, WallachBeth Capital

Since ETFs track an underlying index, the ETF may trade at a premium or discount to what it’s really worth. Reasons for premiums or discounts include liquidity of the underlying securities, liquidity of the ETF itself, costs associated with executing the underlying names, etc.

“We try to give our customers a menu of options for obtaining best execution, not only by finding the best price in the secondary market, but we also observe how the underlying names trade in the primary. In addition ETFs trade differently depending on the time of day, so we try our best to educate our customers on ways they can receive the best execution possible depending on what name they are looking to enter/exit,” said Mo Bajaj, director of ETF and portfolio trading services at ETF execution specialist WallachBeth. “Timing is an important aspect when trading any product. Certain names trade better earlier in the day and as the day progresses, spreads can widen.”

WallachBeth has been active in helping to execute both liquid and illiquid ETFs, such as emerging market and fixed income names, “which we have been able to provide our customers with very competitive pricing for,” said Bajaj. FOR THE FULL STORY FROM MARKETSMEDIA, PLEASE CLICK HERE.

Agency-Execution Firm Adds More ETF Experts

February 5, 2014 -WallachBeth Capital LLC, a leading provider of institutional execution services, announced today that program trading expert Thejas Nalval has joined the firm in the newly created role of Director, ETF & Portfolio Strategy.

Mr. Nalval comes to WallachBeth with ten years of industry experience. Prior to his most recent role in the Market Risk group at J.P. Morgan & Co., Naval spent seven years at Goldman Sachs where he was responsible for trade execution and risk management surrounding portfolio rebalances.

According to Michael Wallach, CEO of WallachBeth, “As the universe of institutional clients continues to embrace advanced indexing and customized program strategies, the expertise and insight that Thejas can provide when configuring and executing their strategies will further distinguish the role our firm plays in the marketplace. The addition of Thejas, as well as other recent hires to our team illustrates our commitment to continually evolve our  offerings to help position our clients for growth and success.”

Top Execution Broker Pick for 2014: $IAI the Fincl Srvs ETF

In the spirit of "..It takes one to know one..." and notwithstanding the "late print,"  one leading Wall Street broker who specializes in ETFs (and, who typically prefers to play down price predictions and remain focused on best execution vs. best picks)  has an interesting 2014 outlook for a select segment of financial service companies.. Here it is..(thanks to a delayed tape from CNBC)

Industry’s Top Institutional Broker-Dealer and Trading Technology Vendor Awards Goes To…

wsl awardsWall Street Letter, one of the Industry’s must-read publications courtesy of financial media company Pageant Media, just announced its “short list” of finalists in connection with WSL’s 3rd Annual institutional trading awards.

While the 2014 “best of” categories  cover each of the likely specialties (e.g. best agency-broker/options, best brokerage platform, best DMA platform, best algo platform,  best technology vendor(s), best research, etc.), this year’s “bake-off of the best” includes not only the ‘likely suspects’ whose brands are burnished across the industry landscape, but a selection of boutique firms that certainly deserve a shout-out (and perhaps the trophy!), particularly when looking at those on the short list of nominees for “Best Options Trading Platform“, “Best DMA Offering”, Best Client Service-Broker/Dealer“, “Best Research-Fixed Income” and “Best Options Broker-Dealer.”

Far be it from us to front-run WSL by disclosing the full picture of front-runners; we’ll give credit where credit is due…..”And, the WSL 2014 Award nominees are (drum roll please!)…..CLICK HERE

ETF Trading Market Veteran Joins Agency-Execution Trailblazer WallachBeth Capital

globenewswire-106x27_141159

NEW YORK, Jan. 8, 2014 (GLOBE NEWSWIRE) — WallachBeth Capital, a leading provider of institutional execution services, announced today that ETF industry veteran trader Mohit “Mo” Bajaj has joined WallachBeth in the newly created role of Director, ETF and Portfolio Trading Services.

Mohit "Mo" Bajaj, WallachBeth Capital
Mohit “Mo” Bajaj, WallachBeth Capital

Mr. Bajaj brings over 10 years of ETF principal market-making and global bank trading experience to agency-only brokerage specialist WallachBeth, most recently serving in a senior ETF facilitation role at Deutsche Bank. According to Michael Wallach, CEO of WallachBeth, “Mo further strengthens our core capabilities and his wealth of ETF and portfolio trading expertise will help our clients navigate the increasingly complex and evolving ETF landscape.”

Added Wallach, “Irrespective of the product we are trading or the client we are serving, our process for executing sophisticated trading strategies at WallachBeth is holistic. Our value-add comes from leveraging a combination of deep product knowledge, extensive trading market insight and, most important, providing an un-conflicted human analytical element. Mo is a perfect complement to a seasoned team that is well-recognized for both their capabilities and thought leadership across the institutional ETF and program trading marketplace.” Continue reading

ETF and Options Execution Firm Expands Global Footprint: More Hiring In Store

wall-street-letter-logo  Courtesy of Wall Street Letter reporter Sean Creamer

Institutional brokerage WallachBeth Capital LLC will expand its staff to bolster electronic trading across exchange-traded funds and options over the next two years, according to Michael Wallach, CEO.

The agency broker-dealer aims to bring on 15-20 people, some of whom may be college interns who transition to permanent employment with the company, according to Wallach.  He added “this strategy ensures the staff has a rounded experience in the firm before taking up a permanent role.”

WB CEO Michael Wallach (r), Pres/COO David Beth (l)
WB CEO Michael Wallach (r), Pres/COO David Beth (l)

Beyond staff expansion, the brokerage, whose headquarters is based in the heart of Wall Street and maintains a footprint in the UK, is aiming to expand its ETF execution presence to South America to serve pension fund managers in these regions, Wallach noted. “ Many money managers throughout the world now trade US ETFs. We want to introduce our model to any region whose managers want and need real best execution services.”   To view the full article from WSL, please click here.

Pre-Thanksgiving Special: Custodians Flip The Bird to RIA Customers Seeking ETF Best Execution

riabiz logo  Courtesy of RIABiz and reporter Lisa Shidler

MarketsMuse Editor Note: Kudos to Lisa “Lois Lane” Shidler for her insightful expose profiling how custodians to RIAs excel at squeezing lemons from customers who they must think are lemmings. Though Ms. Schilder neglected to spotlight the fact that custodians systematically sell their customer orders to select principal trading firms (e.g KCG) who cherry-pick orders they can exploit for trading profit, her insight i.e. the practice of imposing exorbitant trade-away fees on those very same customers who seek to secure the real best prices via independent execution only firms is a topic worthy of sharing this story with industry regulators. Too bad those latter folks don’t get it…perhaps because they’re beholden to the biggest custodians in the industry?

Here are a few excerpts:

The big four RIA custodians are now charging advisory firms giant new fees — in the tens of thousands in some cases — relating to some ETF purchases.

Schwab Advisor Services, TD Ameritrade Institutional, Pershing Advisor Solutions LLC and Fidelity Institutional Wealth Services are levying what are known as “trade-away” fees to RIA firms that buy exchange traded funds through a broker-dealer other than the one owned by the custodian. The advisor typically chooses to use these third parties because they believe that RIA custodians are executing trades poorly along the bid-ask curve and forcing them to make ETF purchases at unacceptably high prices.

At first blush the fees look fairly benign. The fee at Fidelity is a $20 fee per account per trade. TD Ameritrade charges $25 per account. Pershing’s fee ranges from $8 to $20 per account depending on the volume of the trade. Schwab declined to disclose its fee through its spokesman, Greg Gable.

These fees have put RIAs like Chris Romano, director of research and trading with Fusion Investments Group LLC in Pittsburgh invests, in a bind in certain instances.

Though his firm manages about $139 million in assets, the bulk of them are institutional and banks custody them. Fusion advises for other RIAs but those assets are held away. In short, his firm manages just $11 million of mostly ETFs with Fidelity’s RIA custody platform, which means Fidelity’s $20 fee is too costly for the size of trades that he does.

“We don’t even consider trading away [in effort to get best execution] at Fidelity because of the high ticket trade away fee,” Romano says. “On the smaller account sizes, it can be a really significant fee. If the fee is $20, that can really add up.” Continue reading

Professional ETF Trading Insight: Through The Lens Of A Leading Market Expert

One of the best video elements for sophisticated investment managers [and all others] seeking expert insight re ETF portfolio management. Interview below with one of the global ETF market’s most recognized trade execution experts is courtesy of financial industry publisher and conference producer MarketsMedia. Many thanks to them for making this clip available.

Wall Street Women Awards Winner: Jennica Ross – Rising Star

tradersmagazine logo Courtesy of John D’Antona, TRADERS magazine.

Recognizing today’s and tomorrow’s leaders, the Rising Star Award is intended for high-impact professionals who will continue to lead the industry for years to come.

Rising Star: Jennica Ross, Director of Strategic Relationships, WallachBeth Capital

To fully understand the business of trading, one must be able to see the whole picture clearly, else risk missing something.

Rising Star Jennica Ross

It’s very easy in trading to get highly specialized, niche-oriented and absorbed in market microstructure, and to lose sight of what the trading industry’s goal is, said Jennica Ross, director of strategic relationships at WallachBeth Capital. That’s why she chooses to view things from a client-centric, holistic approach.

“We tend to be very critical on what our immediate function is—get down into the weeds—but sometimes we forget to step back and look at the industry as a whole,” Ross said. “We’ve got to challenge ourselves to see what we do on a day-to-day and how it affects our clients and what trends it gives way to.”

A self-described “big-picture person,” Ross is always moving ahead, learning new concepts and implementing fresh ideas that keep her and WallachBeth Capital ahead of the curve. She credits her ethos in part to her liberal arts background—she is a graduate of Princeton University—and to her parents, one a former principal and the other a former teacher.  To continue reading the entire story, please click here

Securities Industry Recognizes Women of Excellence : Wall Street Women Award Winners

tradersmagazine logo Courtesy of TradersMagazine

Women Trailblazers, Entrepreneurs, Mentors, Rising Stars and Others Honored for Their Achievements

– Trading is and always has been a man’s world. But there are exceptions to every rule. Women in trading have made their imprint on an industry that has not always been female-friendly. Welcome to Traders Magazine’s Wall Street Women Awards. Join us in congratulating these 15 award-winning women who have placed their mark of success upon the Street—and as a result, are being honored for their accomplishments.

"Rising Star" Jennica Ross, WallachBeth Capital LLC
“Rising Star” Jennica Ross, WallachBeth Capital LLC

The winners’ stories of leadership, perseverance, assertiveness and charity are inspiring to both women and men, young and old.

The Women of Excellence Awards were made in (8) categories and the following winners were selected by an independent advisory committee comprised of women in the financial community with decades of experience:  Excellence in Leadership (Anna Ewing, NASDAQ OMX and Christine Sandler, NYSE); Industry Trailblazers (Nathalie Texier-Guillot,  Citigroup and Johanna Rossi, Alden Global), Lifetime Achievement (Elaine Kaven, StockCross), Rising Stars (Jennica Ross, WallachBeth Capital and Clare Fraser, Omgeo) Entrepreneurs of the Year (Nancy Havens-Hasty, Havens Partners and Ivy Zelman, Zelman & Associate); Mentors of the Year (Eva Walsh, JPMorgan Asset Mgt and Bina Kalola, BAML); Charitable Works Award (Holly Mitchell, ITG and Ellen Kratzer, Fiduciary Trust);  and Crystal Ladder Award (Tracy Buell, ConvergEx Group and Jamie Bogen, Bloomberg Tradebook). Continue reading

ETFs Test Market-Making Skills

marketsmedia logoCourtesy of Steve Marlin/MarketsMedia

With exchange-traded funds playing an increasingly important role in portfolio management, the ability to accurately price the instruments has placed a premium on market-making skills.

“ETFs are a unique breed of financial instruments,” said Chris Hempstead, director of ETF execution services at WallachBeth. “Order execution requires the ability to navigate these markets and compel liquidity providers to offer customers the most aggressive bids and offers.”

With upwards of 1,500 listed products in the U.S. alone, the secondary market for ETFs remains evolutionary, and liquidity in many ETFs is often elusive, despite the sophistication of screen-based electronic markets.

Chris Hempstead, WallachBeth Capital
Chris Hempstead, WallachBeth Capital

“ETF wrappers provide an efficient way to gain access to an index,” Hempstead said. “But not all ETFs have sufficient depth of quotes, so you need to partner with someone who knows how to value an ETF. Even SPY, the most liquid ETF, doesn’t trade exactly at NAV [net asset value]. For less liquid ETFs, the spreads could be considerably higher.”

Sourcing liquidity at the right price for ETFs, ETNs and CEFs requires an advocate with a wide net, unhindered visibility and unencumbered market access, one whose pool of liquidity extends beyond traditional screen-based markets and the boundaries that conventional brokers are constricted to. “Because we’re product experts we are able to use both traditional and tech-savvy means to quickly and efficiently canvass a broad and diverse universe of reliable liquidity providers,” Hempstead said. Continue reading

Just Released: Elkins McSherry Top Executing Broker Report

Courtesy of Pensions & Investments and independent research firm Elkins/McSherry, here is their latest report listing the industry’s top executing brokers…Most of the names are ‘industry standards’; new entries to the list are worth noting.

Click on the P&I logo to review pensioninvestment logo