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Thursday, May 8, 2025
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Transaction Taxes Don’t Help

By
Editorial Staff
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Transaction taxes result in more volatile markets, wider bid-ask spreads, greater market impact and a decrease in volume. Those are key findings of a recent study conducted jointly by the Bank of Canada and Rutgers University into the impact of a transaction tax administered by the State of New York until 1981.

Anna Pomeranets, an analyst with the Bank of Canada, and Dan Weaver, a professor at Rutgers, conducted the study, “Security Transaction Taxes and Market Quality,” in light of movement on both sides of the Atlantic to adopt trading taxes. Both European and U.S. politicians have pushed for trading taxes, arguing they would raise revenue and dampen speculative trading activity.

Opponents argue the tax would push up the cost of trading and shift volume to countries that don’t tax trades.

In Europe, 11 of the 27 European Union countries were recently given permission from the European Parliament to establish the taxes.

In the United States, Sen. Tom Harkin, D-Iowa, and Rep. Peter DeFazio, D-Ore., reintroduced bills recently they’d previously drawn up, proposing to impose such a tax.

Pomeranets and Weaver studied nine changes to New York State’s securities transaction tax between 1932 and 1981, when the tax was phased out. What they found was that increases in the tax were associated with a deterioration in market quality, including increased volatility, wider bid-ask spreads and lower volume.

 

(c) 2013 Traders Magazine and SourceMedia, Inc. All Rights Reserved.
http://www.tradersmagazine.com http://www.sourcemedia.com/

ConvergEx Algo Searches Pre-Market

By
Editorial Staff
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ConvergEx Group is now offering an automated trading option for buysiders who want to trade before the equities mart opens.

Trading the market during the thinner pre-open-the time prior to 9:30 a.m.-has always been done manually. Now, the ConvergEx algo works between 7:30 a.m. and 9:29 a.m., facilitating faster and more efficient trading before the masses jump in, said Scott Daspin, managing director in the global electronic execution group at ConvergEx.

Using the algo also helps keeps the buyside’s order size private. That would not be the case if the order were executed manually by floor traders.

“This is targeted at momentum traders and players,” Daspin said. “Our clients wanted the ability to trade electronically before the market opens.”

Daspin told Traders Magazine that the algorithm computes a prediction of market volume and then calculates trading spreads and volatility. Once these factors are estimated, the algorithm can then execute based on the user’s desired participation rate. It also seeks liquidity in the dark venues, not just in the displayed markets.

 

(c) 2013 Traders Magazine and SourceMedia, Inc. All Rights Reserved.
http://www.tradersmagazine.com http://www.sourcemedia.com/

Celebrating Excellence

By
Editorial Staff
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On Jan. 15., nearly 300 attendees gathered in New York to honor the award winners for Traders Magazine’s second annual “Wall Street Women: A Celebration of Excellence.” There is no upward limit to what women can accomplish in today’s trading world. The winners’ stories of leadership, perseverance, assertiveness and charity are inspiring to both women and men.

The reception included speeches from Sheri Kaiserman, head of equities at Wedbush Securities and winner of the Excellence in Leadership Award. Stephanie Ruhle, an anchor on Bloomberg Television, gave the night’s keynote speech. Later this year, Traders Magazine will celebrate its third annual Wall Street Women event.

 

(c) 2013 Traders Magazine and SourceMedia, Inc. All Rights Reserved.
http://www.tradersmagazine.com http://www.sourcemedia.com/

BATS Publishing Rival Spreads Between Exchanges

By
Editorial Staff
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BATS Global Markets has begun publishing rankings of 12 national stock exchanges by measures of “market quality.”

The operator of the BATS Z and Y exchanges is publishing daily rankings by how narrow the effective spreads are between the best bids and offers on orders executed across all exchanges. 

The spreads, which are published here, are drawn from consolidated tape data supplied by Securities Information Processors. The spreads are calculated against the best bid and offer nationwide at the millisecond an execution occurs.

The lowest effective spread indicates that investors are getting the greatest improvement in prices, both in buying and selling shares, in these rankings.

The exchanges are ranked by the effective spreads on stocks in the Standard & Poor’s 500 Index and the BATS 1000 Index. They are also ranked by the top 100 corporate issues and top 100 exchange-traded funds and similar products.

Exchanges gain standing in the rankings if they rank first, second or third in effective spread on a given stock.

Besides the broad rankings, exchanges are also ranked on individual stocks.

For instance, Nasdaq’s PSX exchange on Wednesday ranked first on the effective spread on shares in search engine leader Google, at 14.1 cents a share. BATS Z came in at 17.6 cents and BATS Y at 18.3 cents.

Rankings of exchanges by effective spreads on an individual stock can be produced here.

On S&P500 stocks, BATZ Z came in first and BATS Y last of the 13 exchanges. BATS Z had the lowest effective spread on 252 of the 500 issues, the second lowest on 99 and third lowesst on 63. BATS Y was unranked.

“We are please to provide these objective statistics free of charge to investors and our members to assist them in making informed decisions about where best to execute their trades,” said Chris Isaacson, chief operator officer of BATS Global Markets, in a prepared comment.

The company said it would have begun publishing the rankings, if its flagship Z exchange had not been the highest ranking exchange on effective spread at the outset.

“Yes. We would have published the market quality stats if we did not rank as favorably,” according to BATS senior vice president Randy Williams. “For the same reason we put our market share stats out there every month, whether the numbers are up or down.”

The company acknowledged that it hoped the rankings would influence decisions of existing and potential customers about where to execute their orders.

BATS also publishes rankings of itself and its rivals by share of market for shares of stock traded in U.S. markets, each day.

SIFMA Seeks Role in Oversight of Audit Trail

By
Editorial Staff
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The Securities Industry and Financial Markets Association Thursday called on the nation’s stock and options exchanges to allow a wide range of market participants be involved in the design and governance of the system that will take in all stock and options transaction information overnight, for federal regulators.

SIFMA, which represents securities firms, banks and asset managers, said oversight and governance of the organization that will develop and operate the consolidated audit trail of stock and options quotes, orders and trade details should include “adequate industry representation on an appropriate governance or advisory body.’’

The SEC in July charged the national securities exchanges and the Financial Industry Regulatory Authority with coming up with a plan for an automated system that would establish a consolidated audit trail that would make it practical to monitor and analyze trading activity in the nation’s equities and options markets. The trail is being created in the wake of the May 6, 2010 Flash Crash, so regulators can monitor and react to market disruptions immediately.

That group includes NYSE Euronext, Nasdaq OMX Group, BATS Global Markets, Direct Edge, the National Stock Exchange, the Boston Options Exchange, the International Securities Exchange, the Chicago Board Options Exchange, the Chicago Stock Exchange and FINRA, the independent regulator of brokers. These groups are regarded as the industry’s “self-regulatory organizations” or SRO’s, by the SEC.

“The intent of the SROs is to get it right. To create the most effective, efficient system that they can,’’ said Tom Price, managing director of operations and technology for SIFMA. “ What we’re saying is that our interests are aligned there. So we should be more constructive in those conversations.’’

SIFMA envisions inter-dealer brokers, agency brokers, retail brokers, institutional brokers, proprietary trading firms, small broker-dealers, firms with a floor presence and trade associations getting involved in design and governance of the initiative. Price said involvement of such industry participants would “absolutely” not slow down the current governing group’s intent to submit its plan for creating the audit trail system to the SEC by December.

The SEC had originally mandated that the plan be delivered by April 26.

SIFMA, in a white paper issued Thursday, did however call for more time to be devoted to building brokers’ part of the system, when development is underway.

The trade group said the “proposed timeline for publication of broker-dealer interface specifications does not leave sufficient time for broker-dealers to complete their internal systems build and testing” by the time their systems are supposed to be oeprative in December 2015.

SIFMA said three or four rounds of industry-wide testing will be needed, each taking up to six months..

SIFMA said its members could be part of the Advisory Board set up as part of the governance structure for the development of the trail.

The SEC declined comment on whether its approval was needed for any administrative structure that involves a wide number of industry firms, beyond the exchanges and FINRA.

The rule that requires the creation of the trail, however, leaves it to the SROs and FINRA to resolve governance issues.

FINRA, NYSE Euronext and Nasdaq OMX Group had no immediate comment.

SIFMA also said the system, which former SEC chairman Mary L. Schapiro in 2010 projected would cost $4 billion up front to build and $2 billion a year to operate, should be funded by a combination of new revenue sources and cost savings, rather than fees to the industry.

One revenue source could be sales of portions of the data collected by the system, which would be the first comprehensive, centralized daily repository of options and stock market details, SIFMA said.

And savings could come through elimination of duplicative rules and elimination of outdated systems, throughout the industry.

A new system could replace the Order Audit Trail System maintained by FINRA, the Electronic Blue Sheets kept by the SEC and the Consolidated Options Audit Trail System and Large Options Position Reporting system maintained by the options industry, SIFMA said.

Goldman, Two Sigma Gain Share in Wholesaling

By
Editorial Staff
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Two newcomers to the wholesaling game are moving up in the rankings.

Two Sigma Securities, an affiliate of money manager Two Sigma Investments, and Goldman Sachs have boosted their shares of the retail order flow pie among brokers’ brokers in the past year, according to data aggregated by Thomson Transaction Analytics.

Two Sigma, for instance, saw shares traded during the month of January more than double to 490 million from January 2012. Goldman saw its share volume triple to 288 million in the period.

 While the marketplace is still dominated by the five largest wholesalers—Knight Capital, Citadel, UBS, G1, and Citi/ATD—the increases push Two Sigma into the No. 7 position. Goldman remains in ninth place.

Executives at Two Sigma, which bills itself first and foremost as a technology shop, say it is their technology that gives them an edge. “Clients see that markets are changing,” Simon Spenser, a principal of Two Sigma Securities, told Traders Magazine, “and technology is in our DNA. We built our technology from the ground up around the client experience.”

During the year, shares traded by the 10 largest wholesalers rose by about 4 percent to 16 billion shares, according to the aggregated volume data. Knight saw its volume increase by 800 million shares. Players such as Citadel, UBS and GETCO experienced declines.

The data come from reports prepared by the wholesalers in compliance with the Securities and Exchange Commission’s Rule 605. The wholesaling business involves the execution of retail orders by market makers, or brokers’ brokers.

In addition to the volume data, the SEC requires market makers to report certain execution metrics such as speed of execution and the amount of price improvement given.

Thomson Transaction Analytics, a unit of Thomson Reuters, aggregates the data and makes it available for purchase.

Security Traders Association of Florida Annual Conference (Part 2)

By
Editorial Staff
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FX NOTEBOOK: EBS Names Head of Market Surveillance

By
Editorial Staff
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The electronic FX unit of ICAP picks a Friend to be head of its market surveillance and enforcement operation. UBS to provide liquidity to FXSpotStream. Bank of America Merrill Lynch rolls out services to handle regulatory requirements for cross-border transactions. MarkitServ opens center for pre-trade credit checks. Then, there was the “diesel boom.”

EBS: The electronic FX trading platform of interdealer broker ICAP said it named Simon Friend as its Head of Market Surveillance.

Friend will lead development of the EBS Market Surveillance and Enforcement operation that oversees its pool of liquidity in currencies.

Friend has been a senior associate in the Transaction Monitoring Unit of the United Kingdom’s Financial Services Authority.

Before that, he held a number of compliance and surveillance positions at broking and trading firms.

FXSpotStream: The electronic communications network subsidiary of LiquidityMatch said UBS is now providing liquidity.

UBS becomes the seventh bank providing liquidity to FXSpotStream. The others include Bank of America Merrill Lynch, Citigroup, Commerzbank AG, Goldman Sachs, HSBC, J.P. Morgan and Morgan Stanley.

The majority of LiquidityMatch shareholders are also liquidity providing banks of FXSpotStream.

FXSpotStream aggregates liquidity for spot FX trades.

Bank of America Merrill Lynch: The brokerage business of Bank of America rolled out online services to help institutions deal with cross-border payments as outlined by the Dodd-Frank Remittance Regulation 1073 (DF-1073). The services, first brought out six months ago, now have customizable features and will be updated when the final rule is published by the Consumer Financial Protection Bureau.

The products incude FXtransact White Label and Information Exchange for Payments. These provide clients with access to fee, tax, availability date and other key information on foreign exchange and other cross-border transactions.

MarkitServ: The trade processor said it launched a pre-trade credit checking service for over-the-counter derivatives transactions.

The service will help buy-side firms as interest-rate and credit-default-swap transactions move onto centrally cleared execution facilities, as mandated by the 2010 Dodd-Frank Wall Street Reform Act.

Buy-side firms, regional banks and other institutions will get a consolidated view of the credit available to them from their futures commissions merchants. This will help institutions determine how to deploy their credit lines among multiple clearing venues.

The service can also be used for checking and managing credit lines required for off-facility voice and block trades, as well.

The Credit Centre will initially check credit for trades in OTC credit, foreign exchange and rates. The service will use Tradexpress technology from Cinnober.

Diesel Boom: The chair of the European Union is formally named Jeroen René Victor Anton Dijsselbloem .

But the 46-year-old now goes by the popular title “Diesel Boom,’’ after the blowback he achieved on currency markets Monday.

He detonated a grenade by saying the take-a-piece-of-depositors’-bank-accounts approach to solving the Cyprus financial crisis would “serve as a template” for solving such crises elsewhere (presumably in European places such as Spain or Greece or Italy).

That stopped markets in their tracks and by the end of the day Dijseelbloem was trying different forms of taking back what he said. 

Wall Street $ (1985-2012): Bonuses Up, Total Pay Down

By
Editorial Staff
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$13,970.

That was the average Wall Street bonus in 1985.

$121,980.

That was the average bonus in 2012, according to the Office of the New York State Comptroller.

That’s off from a peak of $191,360, just before the credit crisis erupted.

And total pay – average salary plus average bonus – is also down from its peak in 2007.

But if you think your salary or bonus is inadequate for what you do, here’s how pay has held up over the sweep of the past quarter century.

Dollar amounts in this slide show are all in 2012 dollars, to bring all amounts forward to the present, for comparisons.

Click here to start the slide show.

ITG Launches Global Commission Management System

By
Editorial Staff
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ITG has built a new system that offers the buyside a one-stop portal to manage their commission payments across the globe and across asset classes.

The new system, known as Commission Manager, replaces a U.S.-centric commission management system ITG inherited from MacGregor when it purchased the execution technology firm in 2005. The old system was used by North American clients for trading in U.S. equities.

The agency-only broker’s Commission Manager system allows buyside traders across the globe to either credit their CSA bank from trades executed through ITG or they can opt to pool credits from any firm for which ITG aggregates CCA/CSA credits, explained Jack Pollina, managing director and global head of commission management at ITG.

The system also calculates and sends out commission payments in a broker’s home currency.

“Now our commission management system is a global product for global clients,” Pollina said. “Clients wanted to transact business in their own native currencies. The old system couldn’t handle issues local to where they trade and manage multiple managers across many countries.”

Commission Manager works in multiple currencies across the markets and can be tailored by a trader, by region and assets . A trader can track global equity and option trades in a preferred currency and language, with the ability to indicate foreign exchange rates and tax details on payments.

For example, an institutional investor can log on in Italy, look at his trades and costs in euros and manage local taxes though the system. This couldn’t be done in the old system.

ITG aggregate credits from more than 75 executing brokers and can help the buyside trader pay any of more than 4,000 research providers and vendors worldwide.

“ITG Commission Manager saves valuable time for institutional investors and enables them to focus on their core investment activities,” Pollina said.

While making the payment of research more efficient for the buyside, the system also helps manage the logistics of trading by helping the reconcile trades easier, contract management and the ability to manage multiple brokers’ commission sharing and client commission arrangements in one program.

The system was rolled out to North American clients in December as part of a “soft launch” but is now available globally and is in use by 350 firms.

Pollina added that more services, such as a “broker vote” tool, will be incorporated into the system in the future. 

 

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