BrokerDealer Trading Platform ITG Hit With $20mil Fine; CEO Is Out

Posted on by admin

BrokerDealer and dark pool operator ITG and its affiliate AlterNet Securities will pay $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, 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. 

“ITG created a secret trading desk and misused highly confidential customer order and trading information for its own benefit,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “In doing so, ITG abused the trust of its customers and engaged in conduct justifying the significant sanctions imposed in this case.”

 

BrokerDealer Bent on Best Ex Via Agency-Only

Posted on by admin
agency only executing broker

Below BrokerDealer blog post is republished courtesy of financial news curator MarketsMuse.com and spotlights institutional broker Dash Financial, a firm that is positioned as being “agency-only” , a phrase that suggests they only act as broker, not as a contra-side principal trader–a role that is typical to many investment bank trading desks.

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.

BrokerDealer.com provides a global database of brokerdealers operating in more than three dozen countries throughout the free world.

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.

To continue reading the entire story, please visit MarketsMuse.com

John Hancock Selects Dimensional to Manage Smart Beta ETFs

Posted on by admin
images-1

Brokerdealer.com updates that fund giant John Hancock Investments will partner with Dimensional Fund Advisors on six “smart-beta” exchange-traded funds, according to paperwork filed with regulators early on Monday.

Dimensional, based in Austin, Texas, is one of the earliest proponents of factor investing. They blend elements of index-based investing and active investing in order to predictably exploit market returns and minimize trading costs. Many of today’s smart beta products — from index providers including FTSE Russell, WisdomTree, Research Affiliates — are based on a similar premise.

John Hancock unveiled in its preliminary prospectuses for the factor-based ETFs that DFA, the market-beating investment firm that adheres to the academic work of Eugene Fama and Kenneth French, will be the sub-advisor for its ETFs. John Hancock has worked with DFA on mutual funds and asset-allocation strategies since 2006.

Looking to invest? Click here to access brokerdealer.com’s options.

John Hancock initially filed plans for ETFs nearly four years ago, but has yet to bring an ETF to market. However, a new filing with the Securities and Exchange Commission indicates the firm is getting closer to launching its first ETFs.

The new filing provides details and expense ratios on the proposed ETFs. For example, the John Hancock Multifactor ETF, which is expected to charge 0.35% per year, will track an index comprised a subset of securities in the U.S. Universe issued by companies whose market capitalizations are larger than that of the 801st largest U.S. company at the time of reconstitution. In selecting and weighting securities in the Index, the Index Service Provider uses a rules-based process that incorporates sources of expected returns. This rules-based approach to index investing may sometimes be referred to as multifactor investing, factor-based investing, strategic beta, or smart beta.

John Hancock manages nearly $130 billion in mutual funds and money-market funds. Dimensional manages $406 billion. Dimensional already advises on John Hancock-branded mutual funds that have $3.2 billion in assets.

CitiGroup Hired As Puerto Rico’s Broker-Dealer

Posted on by admin
imgres

Puerto Rico has hired CitiGroup as a broker-dealer as the island seeks to restructure its debt, an industry source said on Wednesday.

The bank will host a meeting with creditors in New York on Monday, Melba Acosta, head of the island’s Government Development Bank, said. That will be the first meeting with creditors since Governor Alejandro Garcia Padilla said a week ago that he wants to restructure its $72 billion debt.

The gathering will focus on a report released last week by three former International Monetary Fund officials that said Puerto Rico is in a dire position because of high debt, unstable finances and a stagnant economy. Governor Alejandro Garcia Padilla on June 29 said he would seek to delay some debt payments for “a number of years.”

His administration has yet to say which securities would be affected or how such a restructuring would work. Some bonds are protected by the commonwealth’s constitution or backed by revenue such as sales-tax collections. Garcia Padilla said the government would draw up a proposed restructuring plan by the end of August.
The meeting comes after the Puerto Rico Electric Power Authority paid all principal and interest due to bondholders last week, buying the publicly owned utility time as it works to reach a deal with creditors. The authority, known as Prepa, said it had agreed with creditors, which include bondholders, banks and bond insurers, to extend restructuring talks to September.

A bondholders’ group said in a news release that they would continue to work with Prepa to reach a long-term plan. In addition to negotiations about Prepa’s $9 billion in debt, the talks involve plans to modernize the utility’s operations.

Investors and analysts had feared a default by Prepa could be the first of many from the commonwealth. Now, there’s hope among some investors that the utility will work out an agreement that could be a model for restructuring other Puerto Rico agencies.

To get the full story, read this article by reuters.com.

 

 

Cetera Financial Institutions To Provide Broker-Dealer Services

Posted on by admin
imgres

Cetera Financial Institutions, a firm within Cetera Financial Group, the retail advice platform of RCS Capital Corporation, that provides customized investment solutions to nearly 500 financial institutions nationwide, announced today that it will provide broker-dealer services and solutions to the wealth management programs of Valley National Bank, one of the largest commercial banks headquartered in New Jersey.

Cetera will white-label Broadridge Financial Solutions’ recently launched mobile app geared toward enabling easy access to client data from anywhere in the world.

On the platform, advisers will be able to view their clients’ portfolios and account information and work within the app from their smartphone or tablet. Broadridge Mobile also provides real-time market information.

If you are interested in an investment opportunity click here. Brokerdealer.com is the leading database for broker-dealers looking to help you.

The app for the self-clearing broker-dealer division of Cetera Financial Group, which is RCS Capital Corp.’s retail investment advice platform, will include trading functionality for funds, equities and options as well, according to Broadridge. Other features include document sharing between advisers and clients, client searches and reporting, account inquiry, and book-of-business analysis.

The app is very new itself, having only come onto the market a few weeks ago. The next step for the company’s mobile app is creating an investor-centric mobile experience, where clients and advisers can communicate in a collaborative environment, as well as integrating more components of the platform with other software, based on brokerages’ suggestions.

To read the full report from MarketWatch, click here.