Robert W. Baird & Co. has expanded into program trading and is in the process of hiring a team of traders.
The Milwaukee-based investment bank and research house has the technology in place right now to trade basic programs with current staff. But the goal is to bring in three traders and accompanying technology and support staff in the fourth quarter, said Dan Renouard, Baird’s chief operating officer of institutional equities.
The firm is branching into programs because its clients want the service, Renouard said. No decision has been made as to where the program trading team will be located. Baird has a number of offices around the globe, including U.S. financial centers such as Boston, Chicago and Stamford, Conn.
"Our clients have indicated a need for great client service around program trading and expertise," he said. "And they clearly want to do program trading with somebody who knows what they’re doing. So, our focus is bringing in experts who will help us build out the platform."
Baird joins other firms in its space that are launching program desks to attract flow. As the amount of total expected commissions in U.S. equities is expected to fall next year, according to recent industry studies, mid-tier brokerages have been expanding their products and services to draw more business.
Adding program capability is a smart move for firms like Baird, according to a veteran buysider. For one, they’re a simple way to get paid, as the trades are generally easier, he said. Additionally, they generate a lot of flow, he added. Typical program trades can involve hundreds of stocks and millions of shares.
The volume more than compensates for the fact that their commissions are generally lower than those for high-touch executions. Program trades typically go for one or two cents a share, the veteran buysider said. And sometimes they go for less.
"There are really low payouts, but lots of flow makes up for it," he said. "It’s easy to do; it’s a layup."
After the new team is aboard, Baird expects the program desk to grow. Starting off, the desk will handle less-complicated orders. It will expand its program services as more hires are made and the business grows, Renouard said.
"Initially, you start small," he said. "You prove out your capabilities."
The ramp-up will take place in the coming months, Renouard said. "We’ve made a very significant investment in program trading technology and capability," he said, "and we’re going to be ramping up the desk aggressively starting in the fourth quarter."
