Boutique Broker-Dealers Grab Equities Orders Away from Bulge Bracket


Regional and Boutique Broker-Dealers are in land grab mode for institutional execution business as the ‘six-pack’ aka bulge bracket firms find themselves continuously paring back staff and reducing services due to the costs associated with each part of their business pods. The small and mid-size “agency-only” equities execution firms are increasingly gaining share, yet at the same time, institutional brokerage commission schemes for equities execution remains in a downward spiral. The exception, according to a recent study by Greenwich Associates, is “the boutique firms that provide a combination of high-touch service along with high-tech execution tools will stand out among those vying for business from the investment manager community.”


Larry Peruzzi, Mischler Financial Group

According to Larry Peruzzi, Managing Director and Head of International Equities for agency-only firm Mischler Financial Group, “The feedback we continue to hear from buy-side traders is consistent with the latest Greenwich Associates survey; investment managers want premium high-touch coverage from boutique BDs that can also provide best-in-class order routing and trade execution technologies.” Added Peruzzi, “Large investment managers are still looking to a broker’s research capabilities in the course of adding to a broker-rotation schedule, but the unbundling movement has made independent equities research, including those that have ‘buy-sell-hold’ recommendations, a commodity item that can be obtained away from those captive investment manager-executing broker relationships.”

(Traders Magazine Aug 2 2016)– As ‘bulge bracket’ brokers are faced with ever tightening budgets and focusing more on their larger institution accounts, the mid- and small-size brokers are poised to snatch up those clients left without an executing broker.

The bulge firms, after years of shrinking commissions amid a unique confluence decreased trading volumes, increased technology spend and a heavier regulatory compliance burden have shed staff and cut costs to the bare bone. Thus, having to make due with smaller trading desks and providing a modicum of service expected from the top tier banks, other brokers have been able to step in and grab underserved customers. And more importantly, the commissions that come along with providing both execution and research services.

“We’re definitely seeing this trend right before our eyes here,” said Doug Rivelli, co-head of US equity sales and trading at Auerbach Grayson. “As the trend of unbundling commissions has taken hold on a global scale, the traditional trading desk has had to become more focused on execution quality and broker trading services and firms like us have been able to capture market share.”

This phenomenon was reported also by market consultancy Greenwich Associates, who reported this week that mid-sized/regional brokers’ share of commission payments from institutional U.S. equity trades is increasing.

According to Greenwich, a s recently as 2007, the nine leading bulge-bracket brokers captured 78% of commissions paid by institutional investors on trades of U.S. equities. This year, they are claiming only 60%–down a full two percentage points from 2015. Much of the lost share has flowed to mid-sized/regional dealers, which as a group now take home 28% of U.S. equity commissions, up from just 11% in 2007.

To continue reading the coverage from Traders Magazine senior editor John D’Antona, please click here


Broker-Dealer Bible “Traders Magazine” Acquired by Markets Media

If you are an institutional broker-dealer that is focused on sell-side “comings and goings” (or goings and comings), for years Traders Magazine has likely been your source of sell-side news and related topics of interest.  John D’Antona, TM’s long-standing senior editor and contributing writer has become a mainstay in your diet of news bytes that traders use to keep an eye on and ears open when it comes to job opportunities and prospective greener pastures, as well as regulatory topics, fintech innovation as well as select scraps of intel from buyside trading desks.
Traders Magazine has been your bible (ok, some might call it a rag, or a nice distraction) and per announcement below, its now under new ownership and will reside under the umbrella of Markets Media LLC, the digital and print publisher and producer of financial industry conferences in leading financial centre cities across the globe. Below news coverage courtesy of media industry publisher “Media Post”


(Media Post) Jul 5 2016 Markets Media has acquired Traders Magazine from SourceMedia. The combined entity will have a total unique audience of 135,000, made up of 120,000 digital readers and 15,000 print readers.

According to a statement, Markets Media “is committed to investing in the Traders brand by providing the resources necessary for digital expansion, both immediately and for the long term.”

Founded in 2007, Markets Media is a digital publisher focusing on institutional trading and investing in North American and European markets.

Mohan Virdee, founder and CEO of Markets Media, told Publishers Daily that the acquisition of Traders was “a very nice fit to our existing business in terms of the depth of the trading community across North America. We’ve established a good brand among that community.”

Virdee said the timing of Traders joining Markets Media couldn’t have been better – Markets Media is in the midst of upgrading their platform this summer.

“We have already started to upgrade all of our systems. We will do that with Traders, as well as we go through the transition,” he said.

The upgrades will affect the design and functionality of the brands’ digital space, as well as introduce a “more aggressive social media campaign,” Virdee said.

Additionally, Markets Media will upgrade their mobile presence and create “innovative advertising solutions for our core customers and existing Traders customers,” he added.

For now, the company says Markets Media will operate and as separate sites, producing original content independently.

Traders is a digital information and news service that has served professionals in North American institutional markets for 30 years. The company is also known for its sponsorship of social, charity and networking events.

SourceMedia owns brands like American Banker, The Bond Buyer, Mergers & Acquisitions, Financial Planning, On Wall Street and Accounting Today.

Saudi Stock Market: We’re Open For Business-Sort Of..

open for business saudi stock market and the rest of the investing world have all eyes on the $580bil Saudi Arabia Stock Market as it opens its doors today to foreign investors for the first time. The initial opening will be restricted however; only foreign investment managers with at least $5bil AUM will be able to execute orders and no foreign investors can make bets on Saudi companies serving national security interests or operating in designated holy locations.


saudi stock marketAs reported by Traders Magazine John D’Antona Jr.,  In a move designed to bring more money into the Royal Kingdom and diversify the country away from its traditional oil industry and expose it to the international finance system, Saudi Arabia is opening its stock market to outsiders.

Currently, the country’s stock market, with a market cap of $580 billion – the biggest in the Middle East- is open only to large domestic institutional investors, according to a report in the Wall Street Journal. Up until now, Saudi and select Gulf countries could buy and sell shares. Also, a limited amount of foreign investors who wanted exposure to the country’s companies could execute in the country but had to had to go through a Saudi regional broker dealer. Now, investors can go directly into the market and execute their orders.

The opening of the country’s market comes at a time where the Kingdom is looking to move away from an oil-centric economy – which lately has been battered by the low price of oil and weak global demand. Also, with a softening of the country’s Muslim conservative bent officials felt opening their country to foreign money would be more permissible.

As of today’s Saudi stock market opening, the Journal said that only large global institutional investors, with at least $5 billion in assets under management, can execute buy orders. This limited opening of the market is viewed as bringing only the very savvy and stable investors the market needs at this stage of its development.

And foreign participants are going to have limits – as they cannot invest in Saudi companies that are closely linked to the country’s national security interests or companies located in holy locales, such as Mecca.

“There are many reasons to open the market and to do it gradually, but liquidity is not one of them,” said Mohammed Aljadaan, president of the Capital Market Authority, to the Journal. The CMA regulates the stock market.

BrokerDealer Crime Beat-Brokerage Execs Plead Guilty in Bond Bribery Deal

white-collar-crime blog update profiles brokerdealer firm, Direct Access Partners, pleading guilty after a scheme to bribe an offical at a Venezuelan development bank for more business. This update is courtesy of Traders Magazine article, “Former Direct Access Partners Execs Sentenced in Bribery Scheme“, with an excerpt below.

Two former top executives with institutional brokerage Direct Access Partners, a firm that shut down in December of 2013 after its clearing firm, Goldman Sachs, stopped clearing its trades, have opted to plead guilty for indiscretions regarding its bond trading business.

DAP’s former chief executive, Benito Chinea, and former managing director, Joseph Demeneses, each pleaded guilty one count of conspiracy to violate the FCPA and the Travel Act in connection with a scheme to bribe an official at a Venezuelan development bank, Banco de Desarollo Economico y Social de Venezuela (BANDES), in exchange for the official’s directing BANDES’ trading business to DAP.

Chinea, of Manalapan, New Jersey, and Joseph DeMeneses, of Fairfield, Connecticut, were each sentenced to four years in prison. They were also ordered to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme.

“These Wall Street executives orchestrated a massive bribery scheme with a corrupt official in Venezuela to illegally secure tens of millions of dollars in business for their firm,” Assistant Attorney General Caldwell said in a media statement. “The convictions and prison sentences of the CEO and Managing Director of a sophisticated Wall Street broker-dealer demonstrate that the Department of Justice will hold individuals accountable for violations of the FCPA and will pursue executives no matter where they are on the corporate ladder.”

Three other DAP employees and the BANDES official pleaded guilty last year for their participation in the bond trading matter.

DAP itself filed for bankruptcy.

New York-based Direct Access Partners started out in 2002 as a New York Stock Exchange floor brokerage and grew rapidly over the years in both equities and fixed income. Sources tell Traders the firm has 130 employees.

To read the entire article from Traders Magazine, click here.

Another BrokerDealer-Only Bond Trading Platform: RVQB

BRVQB brokerdealer only bond trading blog update courtesy of extract from Traders Magazine, one of the sell-side’s top publications.

Quantitative Brokers and RiskVal have formed a partnership to create and deliver a fixed income trading platform, called RVQB.

The new sellside bond trading platform “combines powerful real-time analytics with seamless access to QB algorithms for best execution,” according to a press statement. Quantitative Brokers is a provider of agency algorithms for fixed income and futures markets. RiskVal Financial Solutions is a trading analytics and real-time risk management provider.

The RVQB platform integrates QB algorithms and RiskVal trading analytics and aims “to provide traders with real-time control and transparency into their outright and relative value executions.” The solution provides the bond trader with screens that can route orders to Legger, QB’s multi-leg execution strategy, for basis and relative value trading. During a demonstration of the trading platform in Manhattan yesterday, a bond trader can fill in a single trade with reduced keystrokes and data entry.

QB’s Legger algorithm executes user-defined structures with any ratio and number of legs across cash US Treasury and futures markets. A transactional cost analysis report is generated for each execution, providing full post-trade transparency on the order and slippage performance.

“Fixed income traders are continually looking for better ways to actively manage their enterprise-wide risk,” said Christian Hauff, CEO and co-founder of QB. “By marrying QB’s best execution algorithms with RiskVal’s proven relative value analytics, we have created a unique platform that integrates powerful trade discovery with superior execution tools.”

“The fixed income markets are rapidly evolving, and traders are seeking access to smarter and more transparent execution,” said Jordan Hu, founder and CEO of RiskVal. “As the market structure evolution continues, we are excited to address some of the key issues that fixed income traders face in the move to a more electronically-driven model.”

In 2014, both FINRA and the SEC approved QB as a broker-dealer for government securities.