NYSE DMM GTS Making Markets Better: Aligns With Boutique Investment Bank Mischler

NYSE DMM GTS in pact with veteran-owned broker-dealer mischler
NYSE’s Top DMM – GTS – Takes Stake in Boutique Investment Bank Mischler Financial Group

GTS and Veteran-Owned Mischler Financial Group Forge High-Tech, High-Touch Alliance to Serve Corporate Issuers, Investment Managers and Other Market Participants

New York, NY – November 19, 2018 – GTS, the New York Stock Exchange’s largest Designated Market-Maker (“DMM”) and a leading electronic trading firm, and Mischler Financial Group, Inc. (“Mischler”), the financial services industry’s oldest minority broker-dealer owned and operated by service-disabled veterans, today announced a strategic alliance that will establish a best-in-class offering for primary debt and equity market underwriting as well as secondary market best execution across the capital markets.

The partnership, which is anchored by a technology-powered offering for public companies and a broad universe of capital markets participants, will yield a low-cost, more efficient and more effective trade execution experience. Mischler will become a “forward operating base” for the growing GTS capital markets franchise, affording clients access to technology and sources of liquidity that are generally only available to the world’s most sophisticated investors.

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(l)Ari Rubenstein,GTS co-founder & CEO (r) Dean Chamberlain (SDV),CEO,Mischler Financial Group

Founded in 2006 as a proprietary, quantitative trading firm, GTS is now a recognized leader in market structure and proudly oversees trading for more than one-third of NYSE-listed companies. The firm has an extensive track record developing and deploying proprietary, industry-best technology to bring better price discovery, trade execution and transparency to the markets.

“This is a high-tech, high-touch partnership designed to meet the needs of a new generation of issuers, asset managers, and trading and investment professionals seeking low-impact market liquidity and best-in-class execution,” said Ari Rubenstein, Co-Founder and Chief Executive Officer of GTS. “Clients are rightfully demanding innovation in the marketplace, and this alliance is uniquely designed to provide that and much more.”

Mischler, established in 1994, is an active underwriter across global equities, corporate and municipal debt, government securities and structured products. In the last three years alone, Mischler has played a role in almost 700 primary debt and equity market transactions. The firm also provides conflict-free share repurchase services for corporate treasurers as well as secondary market trade execution in equities and fixed income for a discrete universe of public plan sponsors and institutional investment managers.

Dean Chamberlain, Mischler’s Chief Executive Officer and a West Point graduate and former U.S. Army Officer, added: “The combined GTS-Mischler offering holistically provides a powerful arsenal of primary and secondary market solutions for the most demanding capital markets constituents. Mischler’s pedigree, capital markets expertise and front-line position – where we engage with a discrete network of corporate treasury executives and investment managers – is now further strengthened by the unrivaled technology and multi-asset trade facilitation platform that GTS has pioneered.”

Mischler is a fully-certified Service-Disabled Veteran Business Enterprise (SDVOBE) and FINRA’s oldest veteran-owned investment bank and institutional brokerage. “For issuers and investment managers focused on retaining truly expert capabilities while fulfilling their Diversity & Inclusion goals, the combined GTS-Mischler platform will not merely meet, but will exceed all expectations,” added Mr. Chamberlain.

Mr. Rubenstein concluded: “This partnership is another trans-formative moment for the build-out of our capital markets business and reflects the next phase of an evolution in which GTS and Mischler constituents can more easily access and benefit from quantitative, algorithmic, and next generation AI applications. The current environment and the landscape of the future will reward market participants who responsibly leverage technology. If we can arm all investment professionals with these assets, they can thrive in new ways.”

To read the entire story, please visit www.mischlerfinancial.com/mischler-gts-connection

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Minority Broker-Dealer Makes Annual Veterans Day Pledge

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Newport Beach, CA & Stamford, CT – November 1, 2018 — Each year, Mischler Financial Group, Inc. (“Mischler”), the securities industry’s oldest investment bank and institutional brokerage owned and operated by service-disabled veterans, pledges a percentage of the firm’s profits to veteran and service-disabled veteran philanthropies as part of its annual Veterans Day charitable initiative. This year, Mischler is proud to announce that Army Ranger Lead The Way Fund will be the recipient of the Mischler 2018 Veterans Day Month pledge.

Established in 2007, Army Ranger Lead The Way Fund, Inc. (“LWTF”) is a 501c3 Non-Profit created in honor of Sgt. James J. Regan (“Jimmy”) who served with Charlie Company, 3d Battalion, 75th Ranger Regiment. Jimmy was killed in action while serving in Baqubah, Iraq on February 9, 2007, at the age of 26. Since its formation, the organization has been dedicated to raising funds to support disabled U.S. Army Rangers and the families of Rangers who have died, have been injured or are currently serving in harm’s way around the world. LTWF provides spouses and children of deceased, disabled or active duty Rangers with assistance for acute medical care, recovery and wellness programs, warrior transition programs and other services determined to be vital to the family’s well-being, beyond what the government can offer.

Dean Chamberlain, Chief Executive Officer of Mischler and a graduate of the US Military Academy at West Point who served as a Captain in the U.S. Army 4th Infantry Division from 1985-1990 stated, “We are grateful to the many clients of our firm who provide us with the opportunity to demonstrate our capabilities and in turn, afford us the ability to pay back and pay forward to carefully-selected philanthropies throughout the year. When paying tribute to Veterans Day, in particular, we believe that Army Ranger Lead The Way Fund meets and exceeds the objectives of our firm’s philanthropic mission.”

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Mischler CEO Dean Chamberlain (center), General Joseph Votel (right) attending Lead The Way Fund Gala honoring General Votel and Steve Cohen ,Founder Cohen Veteran Network

About Lead The Way Fund, Inc.

Army Ranger Lead The Way Fund, Inc., A 501c3 Non-Profit, Is An Active Duty, Casualty Assistance, Recovery, Transition And Veterans Organization That Provides Financial Support, Beyond What The Government And Veterans Affairs Can Offer, To U.S. Army Rangers And The Families Of Those Who Have Died, Have Been Disabled Or Who Are Currently Serving In Harm’s Way Around The World. The organization website is https://www.leadthewayfund.org/.

About Mischler Financial Group, Inc.

Mischler is a federally-certified Service-Disabled Veteran-owned Small Business (SDVOSB). Established in 1994, the firm is FINRA’s oldest investment bank and institutional brokerage owned and operated by Service-Disabled Veterans. Within the primary capital markets, Mischler provides investment banking, underwriting, and distribution of corporate debt and equities, and municipal debt issuance. Mischler’s secondary market, conflict-free capabilities extend across the U.S. and global equity markets, exchange-traded funds and the U.S. fixed income markets. Mischler also provides asset management for liquid and alternative investment strategies. Clients of the firm include leading institutional investment managers, Fortune corporate treasurers and municipal officials, public plan sponsors, endowments, and foundations. The firm’s website is located at www.mischlerfinancial.com

 

 

Federal Judge View Re: Broker Rebates From Exchanges: Securities Fraud?

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Class Action Lawsuit Against TD Ameritrade for taking Broker Rebates From Exchanges and HFT Firms “May Be Securities Fraud,” Says Federal Judge; PFOF is Under the Gun, Again

(Below re-published with permission from MarketsMuse.com)– Broker Rebates, Payment-for-Order-Flow and “Pay-to-Play” have become synonymous with new world order in which exchanges, dark-pool operators and high-frequency trading (“HFT”) firms, (the so-called “flashboys”) dominate the world of stock trading. While many Wall Street geniuses will argue “the genie is out of the bottle” when it comes to payment-for-order-flow, it doesn’t mean this practice is right-minded, no less legal-and it hasn’t stopped naysayers from arguing that customers’ best interests are clearly not part of the equation. A Federal judge in Nebraska seems to agree, based on his ruling last week that allows a class action lawsuit aimed at TD Ameritrade in connection with their receiving payment-for-order-flow rebates from high-frequency trading (“HFT”) (and not even sharing those rebates with customers!) to proceed. The plaintiff argument is that TD has violated best execution guidelines. Should anyone be shocked?! After all, the topic of payment-for-order-flow and barely-disclosed rebates paid to brokerages by exchanges and electronic market-making firms in consideration for routing orders to them has been a topic of spirited debate for more than several years.

Here’s the excerpt from WSJ reporting by Cezary Podkul:

Mom-and-pop investors who think their brokers are prioritizing high-frequency traders over them may soon have a chance to try to prove their case in court.

A federal judge in Nebraska this month ruled a class-action lawsuit could proceed against TD Ameritrade Holding Corp. AMTD -1.09% , one of the nation’s largest discount brokerages. In his ruling, the judge cited “serious and credible allegations of securities fraud” stemming from the company’s order routing practices.

Plaintiffs allege the discount brokerage prioritized its profits over their best interest on stock transactions

The TD Ameritrade customers who brought the suit alleged the company, which provides investing and trading services for 11 million client accounts, prioritized its profits over their best interests. They claim it did so by accepting incentives from stock exchanges and large electronic trading firms to route customer orders to them without ensuring the customers would get the best prices available – an obligation that along with related factors is known as “best execution.”

A spokeswoman for TD Ameritrade said the company disagrees with the judge and will appeal his ruling.

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The Great Rebate Debate..Broker Disclosure IS Front-Burner Topic

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Exchange rebates paid to brokers for routing orders to their respective venues and the general issue with regard to the now ubiquitous “payment-for-order-flow” model that extends throughout the electronic trading ecosystem has been a topic of discussion for many years now. It may be confusing, but is certainly not an unknown concern to the universe of informed buy-side investors. For those who may be still be uninformed as to how/where/why/when (and how much?!) broker-dealers are on the receiving end of rebates, suffice to suggest its time you get yourself up to speed; your bottom-line can depend on it.

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Image Courtesy of April 2014 Wall Street Journal

Courtesy of financial industry media outlet MarketsMedia’s all-star journalist Terry Flanagan most recent dissertation “Got Transparency?” it is one that deserves an accolade from altruists within the industry, if not a check under the hood or bottom of Terry’s car before he starts the engine.

“One aggravating factor is a lack of transparency. Many market participants do not know either the amount of the rebate or where it ends up.”

As Flanagan points out, “..In institutional equity trading, rebates have been a point of contention since the late 1990s, when Bill Clinton was U.S. President and the Dow Jones Industrial Average scaled 10,000 for the first time.

Supporters say exchanges paying rebates on order flow is a perfectly legitimate practice of rewarding customers and offering volume discounts. Helped by rebates, trading commissions have dropped substantially over the years; the biggest decline from 2005 to 2017 was 68% for the lowest-touch direct market access / algorithmic trades, according to Tabb Group research.

“Most buy-side firms operate with ‘all-in’ pricing models and aren’t provided granularity into fees by order, but the decisions on when and how to route to particular venues significantly impact execution performance…” according to Stino Milito, Co-Chief Operating Officer at Dash Financial Technologies.

On the other hand, critics say rebates create conflicts of interest, and shortchange end investors if brokers route in ways that disadvantages clients……Helped by rebates, trading commissions have dropped substantially over the years; the biggest decline from 2005 to 2017 was 68% for the lowest-touch direct market access / algorithmic trades, according to Tabb Group research.

 “There is absolutely crap disclosure about broker-dealer routing strategies,” according to Dave Weisberger of ViableMkts. “If you can’t get a high-level view of how brokers route and what the outcomes are, then how can you be talking about a transaction fee pilot, or making claims about what rebates do to destroy the market?

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To read the entirety of Terry Flanagan’s piece in the latest edition of MarketsMedia, click here

The Great Rebate Debate..Broker Disclosure IS Front-Burner Topic

SEC Proposal To Address Brokers’ Conflicts of Interest Bashed

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Latest SEC Proposal Broker Conflict of Interest Causes More Than Confusion. Anyone Surprised?!

It would only seem logical that, after counting the thousands of instances (which are only partially revealed via Finra’s brokercheck database) in which retail investors have been ripped-off by licensed investment brokers who have sold an investment product without disclosing conflicts of interest courtesy of incentive fees or kickbacks those brokers are making from third parties when selling seemingly simple and/or complex investment products to the respective customers.  After all, the burden of establishing rules of the road and regulating the practice of selling investment instruments has long been the domain of the US Securities & Exchange Commission and secondarily on Finra, which is a self-regulated body that governs the broker-dealer space–which is comprised of the universe of brokers who sell investment products.  The SEC mandate–according to altruists–is to protect investors from abusive practices advanced by those selling investment products by establishing regulations that protect investors. Further, Finra’s mandate is to impose standards of compliance and to police broker-dealers to ensure they comport with SEC regulations.

Aside from the last comments being somewhat redundant, all of this would seem to make sense, were it not for the fact that Finra is the SEC’s biggest lobbyist. Finra member firms (who pay membership fees) are comprised of all of the brokerages that sell investment products to retail investors and by default, Finra is therefore conflicted when having the biggest lobbying influence on the SEC as to the rules and regulations that govern those member firms.

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Mr. Trump and Mr. Clayton (SEC Commissioner)

Yes, there are consumer advocacy groups that lobby the SEC to ensure proper protections are in place for unwitting investors. But, the fact is those advocacy groups do not have anywhere near the resources to effectively influence the handful of SEC Commissioners who are handpicked by the prevailing administration–meaning those sitting inside the White House. All one has to do is consider the circuitous path aggrieved investors must take when they’ve been wronged to realize the system is stacked against them, starting with investors having to bring their claims via an industry arbitration forum and foregoing their rights to sue the wrong-doers in an actual court of law. Once in arbitration, investors then face a forum that is typically overweighted with “expert” industry professionals–the folks who work for Finra member firms, whether as consultants or direct employees. More important, all one has to do is analyze the number of cases brought by investors against a member firm and their respective broker to recognize the cases resolved in favor of the investor are dwarfed by the number of instances in which a ‘no harm no foul’ determination is made in favor of the defendant.

The good news is that in recent years, enough outcry on the part of investors has led to among other things, the federal government establishing an independent watchdog in the form of the Consumer Financial Protection Bureau, whose role “is to make consumer financial markets work for consumers, responsible providers, and the economy as a whole. We protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law.”  Further, thanks to prior White House administration, the SEC adopted a new set of standards intended to better protect the investor from their investment brokers and imposing guidelines that called for greater transparency and more granular disclosure as to conflicts of interest on the part of investment brokers so that investors could fully understand exactly where their investment dollars were directed and the actual returns on investment they could anticipate receiving.

The bad news is that Finra has fought with tooth and nail to water down those regulations and much like the NRA, they’re experts at navigating the swamplands of Washington DC.  Further bad news-the Trump Administration’s doctrine to loosen regulations on banks and brokers with the goal of making it less onerous insofar as compliance overhead and regulatory oversight so banks can make big profits on transactions and enable them to be more leveraged has also taken aim at those pesky conflict of interest disclosure requirements imposed on investment brokers.

Before TrumpWorld (the political version of WestWorld), it was acknowledged that brokers should be disclosing fees they earn, including commission being charged to the customer and incentive fees the broker is getting paid from the manufacturer of the investment product.

But we know that Trumpeteers have long campaigned to turn the clock back and with the influence of the orange-haired guy sitting in the Oval Office, to bring the world back to the 1950′s so that business titans and US-styled oligarchs who play golf at Mar-A-Lago could become fatter cats than they already are.  And that mindset has included the investment broker space, as evidenced by Trump’s SEC latest proposal to water down existing rules and pending legislation that would favor investors as opposed to the brokers selling investment products–who after all-are either country club members or who vie to be. That’s what makes America great, right?

Something funny happened after the SEC’s latest proposal-investors and brokers have balked. Here’s the opening excerpt from the WSJ coverage..

SEC’s Proposed Curbs on Stockbroker Advice Under Attack

Plan from Trump-appointed officials at SEC runs into criticism from both brokers, investors

WASHINGTON—A government proposal to restrict incentives that can bias broker advice to clients is generating complaints both from Wall Street and investor advocates.

The plan by the Securities and Exchange Commission, developed by Trump-appointed officials, may replace some aspects of an Obama-era regulation by the Labor Department that Wall Street successfully challenged in court. A federal court invalidated the Labor rule, and the Trump administration declined to appeal the decision, killing it for good.

Now investor groups, brokerages and other business groups are taking shots at the SEC’s attempt to address brokers’ conflicts of interest, saying that it is too vague and won’t improve protections for investors. The commission must consider the comments before it can vote to implement the regulation, perhaps sometime in 2019.

The SEC proposal would require brokers to act in the best interest of clients, barring the picking of lackluster or unsuitable investments because they make more money for them or the brokerage firm.

Investor groups say the SEC’s proposed requirements are so ambiguous that they won’t change the status quo. Brokerage firms, meanwhile, complain the measure creates a new standard without telling them how their brokers might run afoul of it. They also complain it treats them more harshly than investment advisers, who have a fiduciary duty to put their clients’ needs first.

“This will only serve to harm the brokerage model and limit choice for those investors who prefer the brokerage advice model,” wrote the American Securities Association, whose members include Cowen Inc., Stifel Financial Corp. and LPL Financial Holdings Inc.

The SEC didn’t define “best interest” in its April proposal. It also didn’t explicitly state how brokers should “mitigate” conflicts of interest that can undermine their need to provide legitimate recommendations.

To read the full coverage, click here