Tag Archives: wallachbeth

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ETF View: What’s Next: Telecom-Media Merge Into XLC

Extra! Extra! XLC is the new ETF that ties telecom and media constituents into one exchange-traded fund! For those with a view towards latest and greatest ETF products, eyes and ears are on the Communications Services Select SPDR Fund (NYSEARCA: XLC) — “it tracks the Communication Services Select Sector Index and “seeks to provide precise exposure to companies from the media, retailing, and software & services industries in the U.S.”

etc-xlcWow. That’s a bucket full of precision when considering the constituents of XLC include among others, Facebook (NYSE:FB), Alphabet Inc (NASDAQ: GOOGL), Activision (NASDAQ: ATVI), Verizon (NYSE: VZ), Comcast (NASDAQ: CMCSA), Netflix (NASDAQ: NFLX) The good news is that ETF maestro Andrew McCormond, Managing Director ETF Solutions for WallachBeth Capital distills the appeal of XLC, the latest innovative exchange-traded fund and one that might be the FANG-style ETF for portfolio managers who have yet to find a one-stop product that meets their portfolio allocation needs.

New ETF merges tech and media from CNBC.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

If you’re on a path to raise capital for a new hedge fund, a fintech initiative or a blockchain-startup, the first step is packaging your pitch and presenting the opportunity within a properly-prepared Prospectus. The go-to firm to assist you? Prospectus.com LLC. Straightforward, Smart and Bespoke Services.

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ETF Broker Rolls Out Quote Capture Tool for Block Trades

JERSEY CITY, N.J., Jan. 17, 2018 /PRNewswire/ — ETF broker WallachBeth Capital, a leading institutional brokerage firm, has announced the Phase I roll out of its internal proprietary Quote Capture platform. The platform further enhances WallachBeth’s commitment to providing institutional clients the highest degree of transparency throughout the ETF execution process.

WallachBeth has always leveraged the advantages of a competitive quote model to source liquidity for outsized ETF block trades, providing price improvement and increased liquidity in often hard-to-trade and/or illiquid products. In light of clients’ interest in the transparency provided by RFQ (“Request for Quote”) platforms, WallachBeth’s Quote Capture tool allows clients to quantify and validate their price discovery process and satisfy compliance obligations.

The foundation of WallachBeth’s ETF execution business is providing institutional clients high touch access to a full suite of execution strategies, coupled with agnostic advice throughout the trade lifecycle. WallachBeth continues to be increasingly relevant to the broadening number of institutions using ETF products and strategies to achieve their investment mandates. Andrew Mcormond, Managing Director, ETF Trading Solutions, at WallachBeth Capital states, “We always emphasize that best price often goes beyond a block trade. True best execution requires a comprehensive plan that includes experienced consultation, pre- and post- trade analysis and the invaluable expertise of seasoned ETF traders.”

About WallachBeth Capital LLC

WallachBeth Capital is a leading provider of institutional execution services, offering clients a full spectrum of solutions to help them navigate increasingly complex markets. The firm’s expertise includes ETF and equity trading, derivatives, and capital markets. Operating on a fully disclosed, agency-only basis, the firm is committed to facilitating all client needs with transparency and integrity. The firm’s website is located at www.wallachbeth.com.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor  or email: cmo@marketsmuse.com.

 

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Insurance Co PMs Getting The Memo: ETF Products Make More Sense

Insurance Co PMs are increasingly getting  “the memo” : Exchange-Traded Funds (ETFs) Make Sense..

(Pensions & Investments) Exchange-traded funds have permeated almost every corner of the financial markets, but insurance companies have primarily kept their distance. That may be changing.

Though several U.S. insurers have navigated the $2.4 trillion ETF marketplace through variable-annuity products, integration into general accounts has been more recent, many observers say.

According to S&P Dow Jones Indices, insurers have only scratched the surface in their use of ETFs. Analyzing National Association of Insurance Commissioners data through 2015, S&P found that property and casualty, life and health insurers only reported an aggregate $15 billion invested in ETFs for general accounts, but the growth of ETF assets has outpaced overall growth of general account assets, which approached $6 trillion at the end of 2015, according to SNL Financial.

Since 2006, the amount of ETFs held by Insurance Co PMs has increased 146% and grown 14.5% per year, whereas total assets in general accounts have increased 26% in the same period, according to S&P. And, as with many measures of institutional investment in ETFs, year-end holdings are not necessarily indicative of ongoing ETF usage in more temporary functions such as transitions and liquidity management.

S&P projects ETF asset values for insurers to double in five years, in line with Greenwich Associates’ annual institutional ETF survey which indicated 71% of insurers surveyed in 2015 expected to increase their allocation to ETFs.

“It’s clear that the largest ETF providers — BlackRock (BLK), State Street and Vanguard — have been working more closely with the insurance companies,” said Todd Rosenbluth, director of ETF and mutual fund research at S&P Global Market Intelligence, New York. “But it’s also a size aspect. Smaller insurers with fewer resources have been more willing to use index ETFs compared to larger insurers paying for active management and investment due diligence.”

“Compared to financial advisers and pension managers, insurance general account managers have more assets and greater risk aversion,” added Mr. Rosenbluth. “The ETF education model is different.”

If you’ve got a hot tip, a bright idea, or if you’d like to get visibility for your firm through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, etc., please reach out via this link

More recently those “educational” conversations are including the growing asset base and efficacy of fixed-income ETFs, said Steve Mickle, a director of institutional sales and trading with WallachBeth Capital LLC in San Francisco. He said that insurers have become the agency brokerage firm’s fastest growing clientele. “They see the size and liquidity of some of the earliest and most foundational fixed-income ETFs as utility products, ones that work for parking cash or interim benchmarking,” said Mr. Mickle.

According to WallachBeth, 132 fixed-income ETFs have been assessed by the National Association of Insurance Commissioners for risk-based capital treatment that could potentially be more favorable than common stock (as ETFs are traditionally reported).

“The NAIC designation is an added feature,” said Bill Best, managing director at VanEck in New York, “but some of the largest insurers are still working through the products and mechanics of ETFs.”

Josh Penzner, managing director at BlackRock Inc. (BLK), has observed insurers testing the waters of fixed-income ETFs, particularly to manage cash liquidity and investment exposures as a placeholder before purchasing bonds that have been “and will continue to be” the core of insurance general account portfolios.

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MarketsMuse blog post title Insurance Co PMs are increasingly getting  “the memo” : Exchange-Traded Funds (ETFs) Make Sense..

ProShares’ Burger King Idea: “Ex-Sector” ETF Menu

Hold the pickles, and hold the lettuce…Just when MarketsMuse curators and an assortment of ETF market enthusiasts thought there might already be enough themes, toppings and twists to the growing number of exchange-traded funds, ProShares is taking a page straight out of Burger King’s 1970’s branding campaign via a newly-launched menu of “ex-sector ETFs.”  The new, S&P-centric menu enables investors to have it their way and to express bets in the S&P 500, but “ex” specific sub sectors. Confused as to why? According to a report by CNBC’s Alex Rosenberg, so are select industry professionals who view this innovation as convoluted. Below is an excerpt from Rosenberg’s juicy bytes..

proshares bk have it your wayA new set of exchange-traded funds offered by ProShares allows investors to get exposure to the entire S&P 500, save for one or another given sector. Specifically, the company now offers ETFs tracking the S&P 500 ex-energy (trading under the ticker symbol SPXE), ex-financials (SPXN), ex-health care (SPXV) and ex-technology (SPXT).

In a Thursday interview with CNBC’s “Trading Nation,” ProShares’ head of investment strategy, Simeon Hyman, highlighted two anticipated uses for the ETFs: diversification and tactical decision-making.

Hyman provides the example of an investor who already has high exposure to a given sector—such as an executive compensated in a company’s stock, or an inheritor who has received a large number of shares—and does not want to take on excess exposure.

“Previously you’d have to maybe call up a trust company or find someone to run a custom strategy for you to avoid that sector, and here it’s just very straightforward: Buy an ETF. The sector’s out, it’s redistributed across the other names on a market-cap-weighted basis, you don’t have to worry about it,” Hyman said.

Second, the ETFs are designed for those who believe a given sector, such as energy, is set to underperform the rest of the market. “If you have that conviction, this is a very straightforward and easy way to effect that view,” he said.

Yet given that retail investors are often considered to be best served by buying into the overall market and avoiding tactical calls, some say these ETFs might be an inferior play compared to, say, SPDR’s popular S&P 500 ETF (SPY).

“As a core holding, you are far less diversified,” Eric Mustin, vice president of ETF trading solutions at WallachBeth Capital, wrote to CNBC. “You are implicitly overweight the other sectors versus the S&P 500 weightings.” The expense ratio, at 0.27 percent, also irks Mustin.

“You are paying nearly 200 percent to 300 percent the management fees” compared to a product like the (SPY), he pointed out. “I think it’s a product that may find some success among a retail audience, but sophisticated investors probably won’t have an appetite for it.”

When there is a “pronounced discrepancy in attractiveness,” such as the clear unattractiveness of energy at the beginning of the year given dismal earnings expectations and high valuations, “it would seem logical to exclude that sector,” S&P Capital IQ’s equity chief investment officer, Erin Gibbs, wrote to CNBC.

“However, these clear-cut unattractive sector events do not happen that often, and therefore these products could have limited appeal,” she added. Here’s what Hyman has to say:

And, as a special treat to MarketsMuse readers who are “of age”, here’s a dandy clip that adds flavor to this story:

This Expert Says: “RISK OFF re High Yield Bond and Utilities ETFs”

MarketsMuse.com update courtesy of coverage by TheStreet.com

Investors should avoid the Utilities Select Sector SPDR ETF (XLU) despite the recent dovish talk by Federal Reserve Chair Janet Yellen, said Mohit Bajaj, Director of ETF Trading Solutions at WallachBeth Capital. Bajaj added that rising rates will hurt the XLU because power companies are levered to debt financing which will become more expensive. He is also bearish on the SPDR Barclays High Yield Bond ETF (JNK) due to the potential for rising rates and problems in the energy sector. On the other hand, Bajaj is bullish on the Financial Select Sector SPDR ETF (XLF) because the large-cap banks will benefit from rising rates and have passed their stress tests. Below is the video interview..

Financial Sector ETFs-This Expert Says…

MarketsMuse ETF update courtesy of mid-day clip from CNBC Squawk Box 10 March, with exchange-traded fund expert guest, Eric Mustin, VP of ETF Trading Solutions for WallachBeth Capital..Editor Note: “Out of the mouths of babes..we won’t challenge any market opinions, especially ones that might be appear contrary in the face of a falling market…we will say this rising star is one bright ‘whipper snapper’…

2015 Buy Side Trader Resolutions:Be More Targeted When Using Sell-Side Executioners; These Experts Would Know

MarketsMuse update courtesy of extracts from 31 December story in industry mag Markets Media.com

marketsmedia logoThe buy side is becoming more targeted with sell-side firms, employing a rifle rather than a shotgun approach as liquidity continues to shrink. A big factor behind this newfound independence has been the lessening of liquidity in 2014 in derivatives and fixed income markets, which has forced buy-side institutions to be more resourceful in sourcing liquidity

“The buy-side is more empowered and understandably, taking greater ownership of their execution and process,” Jennica Ross, managing director at execution firm WallachBeth Capital, told Markets Media. “Within those segments they are obviously narrowing the relationships that they have. They don’t need to have the plethora and the sheer numbers of external sell-side relationships that they had before, and the relationships they do have are now much more consultative.”

“The most surprising thing was how many market making firms basically closed up,” said Dave Beth, president and chief operating officer at WallachBeth. “The lessening of liquidity throughout the whole derivative landscape, both listed and the OTC, we see happening at a broad stroke. Clients should expect [spreads] in derivative markets to widen a little bit. I think it has a lot to do with regulation and with balance sheet usage in the bigger institutions.”

In WallachBeth’s ETF market making business, liquidity remains at high levels. “As far as the ETF cash business, one could say the liquidity is as great as ever and it continues to grow,” Beth said. “Whereas in the listed and OTC options space, there’s been an express decrease in immediately actionable liquidity. I think that it’s affected us no different than any other player. I think clients also recognize that the playing field is changing, and that it’s okay to pay a little bit of a wider spread to get their business done.”

WallachBeth continues to diversify its business in order to take up the slack left by the exit of larger sell-side institutions.

“While there’s been contraction of liquidity within the derivatives space, we’ve seen an increased opportunity from more clients who are getting involved in our other business units, whether that be equity, program trading or fixed income trading,” said Ross.

For the full story from Markets Media, please click here.

 

Talking Trading Technology: This BrokerDealer Has Buyside Clients’ Back

marketsmedia logoBelow extract courtesy of 08 Dec edition of MarketsMedia.com; reporting by Steve Marlin

Agency Broker WallachBeth Raises Tech Bar

WallachBeth Capital, a provider of institutional execution for buy-side investment managers, recently appointed quantitative trading veteran Matthew Rowley to the newly created role of chief technology officer, signaling the firm’s commitment to delivering customized services that address specific and often complex order-execution and related business-process needs.

The company’s founders, Michael Wallach and David Beth, “have a vision of the industry becoming even more technologically driven,” Rowley told Markets Media.

Matt Rowley, WallachBeth
Matt Rowley, WallachBeth

Rowley joined WallachBeth from Crédit Agricole Cheuvreux, where he was credited with helping the firm attain a leadership position in the global electronic brokerage space. more

Equities Options Marts Bustling: 1 Billion Contracts Trade in Q3

tradersmag  Trading in equities options is enjoying a resurgence, thanks to recent volatility in underlying cash markets, a burst in IPO activity and heightened hedging action in the stocks of companies such as Apple, Inc. according to reporting by TradersMag. Citing a TABB Group recent study, 0ptions mart trading volume exceeded 1 billion contracts in Q3. The third quarter gains represent a 4.9% increase from the second quarter total and an 8.2% increase from the year-earlier period.

options volumeIn its latest research, “U.S. Options Market Review: Third Quarter 2014,” Tabb Group also reported that U.S. options volume rebound was driven in part by a 15.8% jump in September’s total as retail fervor around Apple’s new product announcements, the Alibaba IPO and rising volatility brought monthly volume to 365.9 million contracts.

The report, compiled and written by TABB Group principal Andy Nybo, head of derivatives research, also noted that volatility spikes in late July and late September helped push volatility averages up in each month, with the CBOE index averaging 13.5 in both August and September – prompting more trading.

Weeklies trading, Nybo noted, remained strong in the third quarter with volume totaling 270 million contracts, up 7% from the second quarter total and 39% from the year-earlier period.

Noted Matt Gohd, market strategist at WallachBeth Capital, “Aside from volume spikes that typically come with increased volatility, I think there is clearly an increasing trend towards using equity option strategies for opportunistic, alpha capture and hedging purposes on the part of sophisticated investors as well as institutional fund managers.” Added Gohd, “The better news is that an increasing number of fiduciaries recognize that equity option strategies can play a crucial part of their overall approach to managing risk in a responsible way.”

Trade Execution 101: High-Touch is NOT Out-of-Touch-Those Who Disagree Are..

Below courtesy of excerpt from front page article by Dan Strumpf “Markets Keeping Faith in Humanity” in July 29 WSJ Money & Investing section.

wsjlogo“After years of ceding ground to trading via computer programs, buying and selling stock the old-fashioned way—over the phone or its modern equivalent of instant messaging—is holding its own…

“…Last year, about 55% of stock trading by dollar volume took place in a “high-touch” fashion, among human beings communicating one on one and agreeing on the price, according to consulting firm Greenwich Associates, which surveys hundreds of large investors every year. That is still down from the past two years, but only slightly. The figure was 57% in 2012 and 56% in 2011. In 2004, before the introduction of new trading technologies and the proliferation of high-speed trading, the number was 71%….

“…Big money managers cite several reasons for continuing to keep human trading in their tool kits, even though it costs more than computer trading. They include the bewildering spider web of stock exchanges, concerns about aggressive high-frequency traders, and the downturn in volumes that has made it challenging to complete larger trades. And, in many cases, investors say they value the color on how, where and why a stock is trading that only human traders can provide…”

Michael Wallach, CEO WallachBeth Capital
Michael Wallach, CEO WallachBeth Capital

Noted Michael Wallach, CEO of agency-only execution firm WallachBeth Capital, the institutional brokerage specializing in ETFs, institutional options and a provider of independent equity research within the healthcare sector, “The WSJ article underscored important talking points voiced by a broad universe of investment managers who we speak with, most notably their recognition that while screen-based markets provide context, those markets are not only fragmented, but are 1-dimensional when considering the trading landscape is always 3-dimensional.”

Added Wallach, “Managers who position themselves as fiduciaries should require their brokers to conform to best practices, which includes providing both color and navigation skills away from the screen in order to source true liquidity at the best available prices.” Continue reading

Go With The Flow? ETF Execution Expert Says This…

Agency-Execution firm WallachBeth Capital’s Andy McOrmond, a recognized expert in ETF order execution for leading investment managers and RIAs appearing on CNBC with his [personal] thoughts as to whether  now is, or is not the time to “go with the flow.”

Talking points: SPY v. VYM…$HEDJ and more..  Click on the image below to launch the video clip courtesy of our friends over at CNBC.

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WallachBeth Capital’s Andy McOrmond on CNBC

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.”

Algorithms & Altruism 101: Big Buy-Side Player Want Better, Going Back Upstairs

wsjlogoTake-away from (2) news articles today profiling proliferation of algorithmic trading strategies: The buyside “gets it”, but they don’t want it..

 Excerpt from WSJ’s Bradley Hope article “Buyside Traders Move Upstairs”: Some of the world’s biggest investors are changing the way they trade in U.S. markets in response to what they say are rising risks for institutions of their size.

The strategies include conducting more “upstairs trades,” in which deals are executed among big institutions, bypassing the broader market, as well as other sophisticated order-routing techniques designed to avoid pitfalls that have become increasingly apparent to investment managers.

Investors say such measures are increasingly necessary because the proliferation of algorithmic trading and other structural issues, including the fragmentation of the market, are hurting their ability to get the best prices and execute large trades quickly.

marketsmedia logo Excerpt from MarketsMedia “Buyside Traders Seek More..”

With algorithmic trading firmly entrenched in the electronic equity landscape, buy-side traders on an eternal quest for alpha preservation are moving beyond algo selection to algo optimization, which entails monitoring and calibrating as the trade is going down.

“The real objective is to get best execution, which often requires not only picking an algorithm but managing the parameters of that algorithm subject to market conditions,” said Michael Earlywine, head trader, North America at $1.2 billion asset manager Ecofin.

One of the more compelling critiques re: above noted topic is courtesy of industry veteran and electronic trading guru Thomas Quigley, Managing Director/Electronic Trading Group for agency boutique WallachBeth Capital,  “The take-away from both articles is a message that we caveat whenever institutional firms reach out to us for guidance; however commoditized electronic trading approaches have become, and however easy it may seem to choose and implement algo-based strategies, the need for consultative and agnostic guidance has never been more relevant.”

Both above-noted news articles can be accessed by clicking on the logo links adjacent to the excerpt.

Trading Twitter ($TWTR) Options: Eye On Implied Volatility

moneybeat-logo  Courtesy of Kaitlyn Kiernan, Wall Street Journal

Twitter Inc.’sTWTR -1.67% frenzied initial public offering last week is about to be followed by a highly anticipated debut on Friday of options tracking the company’s stock.

But with such a short track record in the stock, prices on the newly listed options contracts might be volatile, options traders say, as they try to pin down an important aspect of an options price.

One key aspect of an option contracts price is a measure known as “implied volatility,” or an estimated measure of the magnitude and frequency of future stock price swings. But with options trading beginning just over a week after the initial offering, there is little data on which to base such a measure.

“It’ll probably take a couple days to figure out where [implied volatility] should fall in,” said Mickey Harned, a broker at WallachBeth Capital LLC. “When GoogleGOOG -0.12% options started, the [implied volatilities] were all mispriced and people lost a lot of money, so people are going to be afraid to make too large a market,” he said.

That means Twitter options traded Friday might be in smaller blocks of less than 100 contracts, Mr. Harned said.

For the full story from WSJ MONEYBEAT, please click here

ETF Market Expert Speaks Out: Navigating Turbulence

In the wake of the now spirited debate as to the direction of equities markets, the more relevant topic of how/where to move in volatile markets in order to get real best execution when trading in exchange-traded products is particularly poignant.

We extend our thanks to the folks at NorthStar Financial’s “Advisor Studios” and ETF market expert Andrew McOrmond, Managing Director at WallachBeth Capital, for shedding light on this very topic! Seeing and Hearing is Believing..

New ETF in Advance of Memorial Day: BBQ–Contributor Column

Contributed by Chris Hempstead, Head of ETF Execution for WallachBeth Capital

Chris Hempstead, WallachBeth Capital
Chris Hempstead, WallachBeth Capital

This week we saw 2 large creates in funds we don’t hear much about. The first was FBG (FI Enhanced Big Cap Growth ETN) with what looks to be about a $600mm creation on Monday. The second worth mentioning was the ESR (iShares MSCI Emerging Markets Eastern Europe) with a roughly $100mm creation on Tuesday.

There were some very heavy directional flows today despite lighter volume on the pre-holiday Friday.
Equities: Inflows today were clear in VUG (Vanguard Growth), VTV (Vanguard Value), IJH (iShares Core S&P MidCap and XLP (Consumer Staples Select Sector SPDR).

Where there are inflows there are also outflows and here they are: EEM (iShares MSCI Emerging Markets), VWO (Vanguard FTSE Emerging Markets), FXI (iShares FTSE China 25), AAXJ (iShares MSCI Asia Ex-Japan), EPP (iShares MSCI Pacific Ex-Japan) and EWH (iShares MSCI Hong Kong).

Fixed Income: The fun didn’t stop at the equities level. MINT (Pimco Enhanced Short Maturity), SHY (iShares Barclays 1-3 Year Treasury) and HYG (iShares Iboxx High Yield Corp); all had nice inflows today.
On the flip side, we saw heavy outflow in EMB (iShares JP Morgan Emerging Market Bond), SHV (iShares Barclays Short Treasury) and JNK (SPDR Barclays High Yield).

Given the Memorial Day Weekend and Holiday, I wanted to be one of those stock market guys who throw out stats that don’t actually tell you anything except what markets did in the past.  So I looked at the S&P performance for 1 month following the Memorial Day Holiday back to 2005. Do you know what I saw?  Nada!  Except for a rough patch in 2008 (-7.5%), I wasn’t really sensing anything worth analyzing and little or no trend. SO, just in case you were wondering, now you know.

My gift to you for the start of grilling season is a special dish I invented during a power outage (I had to cook the stiff that was defrosting): A few lbs of thick cut or slab bacon, seasoned heavily with Cajun spices.

·        Place the seasoned and dry rubbed bacon slices on a grill over medium heat and slowly cook, and regularly flip.

·        Move the slabs and lower the heat if flare ups get out of control. You can also use foil to avoid flare ups but you will lose some charring if you choose this method. Do your best to avoid burning these babies. The true magic is the slow and steady cooking.

·        Bring a cold beer outside and work the grill. You will not believe how delicious a well-done seasoned piece of slab bacon tastes.

I am reading a book about anti-gravity. I can’t put it down.
Happy Memorial Day!

ETF Trading Desk Head Says: “Risk is On…Today..”

Courtesy of the ETF Professor at Benzinga.com

U.S. equities and other riskier assets are in rally mode in the first trading session of 2013 after lawmakers finally got around to agrbenzinga-logoeeing on legislation that steered the U.S. away from the dreaded fiscal cliff. News that a deal was in the works ignited a rally on Monday while news that the cliff will be dodged has done the same today as the Dow Jones Industrial Average is up about 230 points at this writing while the Nasdaq Composite is sitting on a gain of 2.3 percent.

The tenor of Wednesday’s U.S. trading session is clearly risk on, so much so that before 10:30 AM Eastern time, the overall value of equities and ETFs traded was $73 billion, according to data provided by ETF execution firm WallachBeth. New York-based WallachBeth noted that only trading day in all of 2012 – December options expiration – saw equity value traded exceed $70 billion in the first hour of trading.

Chris Hempstead, WallachBeth Capital
Chris Hempstead, WallachBeth Capital

In a note to clients, WallachBeth Director of ETF Execution Services Chris Hempstead highlighted intense buying activity “on the ask” in several marquee broad market ETFs. Buying on the ask could be described as “panic buying” to some extent as traders that are willing to buy on the ask price being shown are indicating they are willing to pay up to acquire shares of a particular stock or ETF. The more times the ask price is hit, the more intense a rally becomes.

Read the full story at Benzinga.com

 

When European ETF Execution Becomes a Stand-Out Factor, PM’s Step Out Orders

logo_financial-news  courtesy of DowJones’ Peter Davy

Dec 10 2012

Exchange-traded funds may be seen as a low-cost investment option but the huge choice of how to trade these products can have expensive consequences for institutional investors.

“It can have a very significant impact. Get a bad execution and you start with a drag on the performance,” said Deborah Fuhr, partner at ETFGI, the research and consulting firm.

In Europe, unlike the US, only a minority of ETF trading is done on stock exchanges. About 70% of ETF trading takes place over the counter, off-exchange, according to ETFGI. That may mean going to an “authorised participant” that is registered to allow it to create or redeem shares of the ETF with the product provider, or simply buying or selling the ETFs without going through the exchange.

For smaller trades and big ETFs tracking a major index, such as the FTSE 100, that may not be necessary. There an investor may trade up to £3m on exchange with few problems. For the bigger trades undertaken by institutional investors and for more esoteric ETFs such as those based on emerging markets or commodity indices, trading on exchange is likely to affect the price (since ETFs on exchange can trade at a discount or premium to the value of the underlying assets they track), requiring them to look elsewhere to avoid doing so, or just to get a better price than available on the exchange.

Thorsten Winkler, co-founder at Frankfurt-based Advanced Asset Management, which manages ETF funds of funds, said it is natural to turn to the investment banks linked to ETFs when looking to trade those products. He said: “You would think they should be able to provide the best execution of their own product.”

In other circumstances, such as trading an iShares ETF, for example, since BlackRock doesn’t have a broking arm, many investors instead turn to specialist marketmakers, committed to providing continual prices to buy and sell ETFs, such as Flow Traders, Susquehanna and Knight Capital.

At Evercore Pan Asset, another fund manager constructing portfolios of ETFs, co-founder Christopher Aldous is keen on WallachBeth, the US institutional broker that entered the European market earlier this year in a joint venture with North Square Blue Oak. It does no principal trading – in which the broker takes ownership of the ETF – but works purely on commission to try to find the best price for clients from marketmakers and other liquidity providers. Aldous said: “For us it is like outsourcing our ETFs sales trading service.”

Laurie Pinto, North Square Blue Oak chief executive, argues that using agency brokers is the only way investors can be sure they are getting the best price. He said: “How can you trade with a marketmaker knowing he is making money out of trading with you – not taking a commission and getting the best price but making money out of the trade? They make their entire living trading against you.”

However, the marketmakers counter that agency brokers have to deal with them. Matthew Holden, managing director and head of ETF trading for Europe at Knight Capital, said: “Agency order aggregators cannot exist without marketmakers.”

For the full article courtesy of FinancialNews, please click here (subscription required)