Captive Order Flow Is Dead, Exec Says
Traders Magazine, January 2002
Broker dealers are staking out their positions in the wake of new disclosure rules from the Securities and Exchange Commission. "The game begins today," Sean McHugh, a vice president of equity compliance at Goldman Sachs, told attendees at a best execution conference in Chicago hosted by data analysis firm Market Systems. "That's what we've told our market centers. There's no such thing as captive order flow anymore." Goldman now makes its order routing decisions based on new execution quality statistics supplied by market centers under Rule 11Ac1-5. It does so partly because it must comply with sister rule 11Ac1-6 and inform its retail customers of order destinations. Market centers, in turn, are scrambling to position themselves in the new environment. "We explain our [11Ac1-5] statistics in a way that illustrates our comparative advantage," said Paul Wigdor, Pershing Trading Company's general counsel. Pershing said it advises customers to focus on their own execution data rather than the aggregate figures.
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