Peak6 Sells its NYSE Floor Brokerage
Chicago’s Peak6 Investments sold its New York Stock Exchange floor brokerage MND Partners to TJM Investments, a Chicago agency brokerage.
Eighteen employees joined TJM, including MND founders Neil Catania and Michael Smyth. Co-founder Dan James left the firm in January. Thomas Kane, who joined MND as a managing partner in 2009, when it was acquired by Peak6, also left in January.
Peak6, an options market-making firm, acquired MND to facilitate the dealer’s hedging activities. The arrangement was also intended to benefit MND, which would be able to match Peak6’s stock orders with those of its institutional customers.
According to Catania, that arrangement didn’t work out as well as expected. Peak6 sold MND, he said, because it decided it did not want to be in the agency business, preferring to focus on proprietary trading.
Catania says MND was a profitable business, but it has had its defections. Last summer, three MND sales traders left the firm to join competing NYSE floor broker Greywolf Execution Partners. At the time, a Greywolf spokesperson told Traders Magazine the traders were drawn by Greywolf’s research offering, something MND lacked.
TJM Investments is a Chicago agency brokerage founded by Thomas J. Murphy and two partners in 1996. It specializes in futures and options trades for hedge funds. Of the deal, executives said it made sense for a boutique agency brokerage to offer trades in both futures and equities.
-Peter Chapman
Rosenblatt: No Order Type Conspiracy
There is no conspiracy between exchanges and professional traders to create order types that work to the disadvantage of the buyside.
That’s the conclusion of the authors of an exhaustive study of exchange order types conducted by Rosenblatt Securities. Despite concerns to the contrary, the researchers found no basis for alarm.
“We’ve been critical of some functionality,” authors Andrew Upward and Justin Schack wrote, “but we find no evidence that exchanges or automated proprietary traders have conspired to create ‘killer’ order types that disadvantage end investors, as some critics have contended.”
The study concluded that the 252 order types offered by the 13 stock exchanges were a natural outgrowth of an “unevenly regulated” electronic market. But the order types did not incorporate any “egregious” advantages to professional traders. Certain order types offered by the New York Stock Exchange do offer its designated market makers advantages, but those have been “expressly blessed by the regulators.”
Rosenblatt undertook the study in response to concern swirling in the institutional trading community that a proliferation of “thousands” of order types had made the marketplace too complex and placed buyside traders at a disadvantage.
It concluded that there are only 252 available order types and that those are based on only 36 archetypes.
Rosenblatt did conclude that the proliferation of order types had indeed added to the complexities of the marketplace and that such increased complexity “undoubtedly creates opportunities for the savviest market participants.” The broker urged buyside traders to bone up on their order types.
-Peter Chapman
Merrill Lynch is Top Broker: Greenwich
Bank of America Merrill Lynch ranked first among the top U.S. equities trading houses in an annual survey conducted by Greenwich Associates. The win comes against a backdrop of declining commissions and retrenchment across the Street.
“We’re pleased with this number-one ranking in the Greenwich survey,” Henry Mulholland, Merrill’s head of Americas equities, told Traders Magazine. “We think it reflects our clients’ confidence that we can offer quality execution, expertise in providing liquidity and deep market insight.”
Of the five bulge bracket shops at the top of Greenwich’s list, Merrill scored 9.1 percent in the survey of 294 asset managers. Morgan Stanley was second, with a score of 8.4 percent. Credit Suisse, J.P. Morgan, and Goldman Sachs all had scores of 8.1 percent.
The scores reflect a broker’s relative importance to the buyside institution, according to Greenwich. That is decided by two factors. First, it depends on the amount of business a broker does with each money manager. Second, Greenwich factors in the size of the manager based on its commission spend with the entire sellside community.
Merrill may have taken the biggest slice of the pie when compared with its peers, but the whole pie shrunk considerably in the past year.
According to Greenwich, institutional commissions totaled $9.3 billion in the year that ended in the first quarter of 2013, down 15 percent from the prior year.
-Peter Chapman
Nasdaq Calls for Parity with Dark Pools
In the latest issue of Nasdaq OMX Group’s in-house magazine, “Market View,” John Zecca, a Nasdaq senior vice president and its head of U.S. market regulation, called for operators of alternative trading systems, or dark pools, to be subject to the same oversight as exchanges.
“To ensure overall market integrity, it is critical to subject all trading venues, including regulated exchanges and dark pools, to the same rigorous transparency and market surveillance standards,” Zecca said.
He noted that the Financial Industry Regulatory Authority does not receive as much information about the trading activity taking place in alternative trading systems as it does from exchanges. That needs to change, Zecca added.
The official also expressed concern that dark pool operators aren’t required to report in detail their operating rules to the Securities and Exchange Commission. Exchanges must file their rules with the SEC, but broker-dealer dark pools need only provide a description of their order-handling process, their customer base and their subscriber requirements, Zecca explained.
“While exchange rules are publicly available and subject to notice and public comment, dark pools submit this more limited information confidentially to the SEC,” he added.
-Peter Chapman
CLSA Launches U.S. Electronic Business
Agency broker CLSA is jumping into the electronic trading business.
CLSA, which to date has only offered high-touch trading to institutional clients in the U.S., is now expanding its business, offering its algorithms and smart order routing to gain market share and get into the electronic trading game, said Ruth Colagiuri, director of electronic trading at CLSA.
CLSA was formerly a part of Crdit Agricole Securities, USA Inc. Now it is an independent broker-dealer. It is registered as CLSA Americas in the U.S.
CLSA looks to parlay its international trading success and model here and has served U.S. fund managers investing into Asia for more than 25 years. In 2009, CLSA initiated coverage of U.S. stocks with a team of more than 20 research analysts.
The firm already offers direct-market-access connectivity in Asia, as well as algorithms in Australia, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan and Thailand.
Now CLSA is looking to get a piece of the U.S. market. Colagiuri said she will be building out the U.S. electronic desk, complementing its extensive high-touch business, hoping to tap into the buyside’s desire to keep its trading costs low in the current low-volume, low-commission environment.
Colagiuri is in New York, and the firm has sales trading desks there and in Boston, San Francisco and Chicago.
“Every one of my traders comes from an established electronic trading business background and has spent time on the electronic side of the business,” Colagiuri said.
-John D’Antona Jr.
STA Explores New LatAm Affiliate
The Security Traders Association is looking to launch a Latin American affiliate of the U.S.-based trade group. Under the direction of its Florida affiliate, the STA has formed a launch committee comprised of individuals based in Florida and Latin America. At this time, the affiliate exists only on paper, but STA officials are optimistic the group will soon establish offices in in Mexico and Brazil.
At the present time, STA has no plans to start this new branch in Latin America, chief executive and president Jim Toes told Traders Magazine in an interview.
Behind the move is a desire among both buyside and sellside STA members to trade in Latin America, Toes said. The new affiliate would be responsible for providing education and a central networking hub for both U.S.- and Latin America-based trading professionals. People or firms who work and reside in Latin America and who want to become members of STA will be directed to the STA Florida affiliate, Toes said.
Once the branches gain enough membership and support, they will be self-sustaining entities and eventually fall under a STA LatAm division.
-John D’Antona Jr.
Getco and Knight Merge NYSE Units
Getco Holding Company and Knight Capital Group, which merged last month, have combined their designated market-maker units on the floor of the New York Stock Exchange under one identity.
The new unit is called Knight Capital Americas, and will trade 1,551 NYSE and NYSE MKT securities, making it the largest designated market maker on the two exchanges. The combination went into effect on July 2. A move to physically combine the two units was to take place over the course of July.
A designated market maker supports trading in those NYSE- and NYSE MKT-listed securities assigned it. The broker-dealer is akin to the old specialist, and has both stricter quoting obligations than other market makers and higher remuneration.
Both NYSE and NYSE MKT designated market makers trade on the same floor. Some designated market makers trade both NYSE and NYSE MKT names at their posts, but on different panels.
Knight’s designated market-making unit trades around 512 NYSE and 139 NYSE MKT-listed securities. Getco’s unit trades about 900 NYSE-listed securities.
There are now six designated market makers operating on the NYSE floor. Besides the Knight-Getco colossus, Barclays Capital, Goldman Sachs, Virtu Financial, J. Streicher & Co. and Brendan E. Cryan & Co. operate posts. With the merger, Barclays drops to second-largest, with about 1,200 securities.
-Peter Chapman
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