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Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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July 2, 2013

White Glove Service

U.K-based Firm Opens NYC Office Providing Super-High-Touch for Exclusive Clientele

By John D'Antona Jr.

For Lionel Mellul, the second time around opening a U.S. trading desk will hopefully prove the charm.

The former co-founder and chief executive of now-defunct Momentum Trading Partners is looking to carve out a niche for himself by offering white-glove, high-touch service to a select clientele. Mellul recently joined Britain's Sunrise Brokers as a managing director, cash equities, to open an equity trading desk in New York City.

Lionel Mellul, Sunrise

The strategy is simple: Keep the ratio of institutional accounts to sales traders as low as possible. This way, traders know their client's needs in an intimate way and can provide them with the highest level of personalized service and execution. At the same time, the buyside knows coverage is focusing on them and a select few others-not a long line of customers.

Research is also a part of the package. Sunrise employs a handful of analysts in the U.K. who offer quantitative, technical and fundamental analysis on mostly European companies. The research effort is in build-out stage. Mellul plans to offer his U.S. clients research on European companies.

On the face of it, opening a high-touch trading desk during the current slump might seem foolhardy. Many brokerages that offer high-touch services have been trimming staff or combining cash desks with their electronic counterparts into a hybrid "one-touch" trading model. Tabb Group recently published statistics revealing that electronic trading now represents 79 percent of total U.S. equity trade volume, down from its peak of 82 percent in 2009, but still up from 65 percent in 2007. This shift in trading volume and execution type has claimed many brokers, including Mellul's alma mater Momentum, which, he said, suffered from a lack of adequate funding.

But Mellul thinks now is the time to open a high-touch desk. He told Traders Magazine that because other brokers are pursuing more electronic means of trading, it opens up a slot for a more personalized, high-touch brand of trading. Reliance on algorithms and electronics, he said, can leave clients cold. Also, he said, larger brokers typically employ one sales trader per 30 or more institutional accounts. At Sunrise, he plans to keep his client list small and desk smaller, with a single sales trader covering only two or three firms at most.

Mellul had hoped to grow this model at Momentum when he started that firm in 2008. Due to the financial meltdown that immediately followed and the subsequent years of shrinking trading volumes and commissions, the firm just couldn't survive. But Mellul wasn't deterred, believing his business model could work, given the right circumstances. Now, five years later, he is employed with the London-based Sunrise. Management has invested in him and is allowing him to implement his vision and move ahead.