BidRoute launches to improve the buy route
EUROPE - A new trading platform for asset managers, which has the potential to break the stranglehold of the top brokerage firms for portfolio trades, could dramatically improve the quality of trading data fund managers present to clients.
BidRoute, whose founding principals include Barry Marshall, former COO of Gartmore, and Kevin Houston, allows investment managers to place portfolio trades, defined as bulk orders for 35 or more stocks, on a single online platform.
Portfolio trading accounts for some 34% of all equities trades in Europe, and 46% in the US.
"There is a price discovery question which, at the moment, is a very manual, phone-based process. What we are providing is a forum on which to put these portfolios and to which brokers will come to see the attributes of that trade and pitch for the business," said Julian Lee, chief operating officer of BidRoute.
"This is a very intuitive and flat market place where everyone gets all of the same information at the same time, and it's very controlled and run by the seller - by the investment manager - much more than the current practice which is much more broker-orientated," Lee added.
If it attracts significant traction, the BidRoute auction service should also allow asset managers to provide more detailed information on the portfolio trades they are executing for institutional clients than they can at present.
"It currently ticks all compliance boxes and feeds into the MiFID framework, so from that point of view it fits a buy-side firm," said Sheena Kelman, head of dealing at Martin Currie Investment Management, which has signed up to BidRoute.
She agreed it should widen the broker pool for programme trades but stressed: "BidRoute now has to get both sides interested in the system. This is the first step in an evolving process.
"At present, portfolio trades are fairly cheap with one or two basis points of commission the norm. Execution costs are more significant, however."
Kelman added Martin Currie was also starting to see more questions from clients on market impact.
"Any client who comes in - and most of our institutional clients come in at least once a year - will meet our dealing team and what they do.
"Dealing is a key part of any client presentation, and we are beginning to get understanding and more questions. Clients want to know about market impact but the number of questions is still very low," she added.
Elsewhere, an electronic platform for trading large portfolios of single-name credit default swaps (CDS) has been launched with broad support from major market participants, following the market's recent sharp growth and pressure from the New York Federal Reserve and the FSA.
Credit derivative dealers and liquidity providers such as BNP Paribas, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Merrill Lynch, Fortis Investments and UBS have already joined the Q-WIXX platform, while four additional dealers are in the process of signing up.
Q-WIXX aims to assist dealers, correlation desks, prop desks, hedge funds and other buy-side market participants to achieve vastly improved pricing and processing efficiencies when executing transactions know as Offers Wanted in Competition (OWICS) or Bids Wanted in Competition (BWICS).
The platform will allow trades to take place in minutes rather than hours, with reduced market risk for both the buy-side and sell-side as well as reduced costs.