Engaging with a new broker can rapidly improve trading outcomes

Published on 27 October 2020

Onboarding the right broker can help a buy-side trading desk generate more effective execution very quickly says Joe Everitt, managing director at Stifel Electronic Trading at Stifel Europe. Getting access to a global network of dealers with electronic access available via an order or execution management system (O/EMS) can only take 48 hours in some cases, giving immediate benefits from the service.

Everitt outlines the onboarding model to work with Stifel Europe, the gains that can be immediately realised and the level of support on offer – for example, with expertise in over 400 algorithm parameters – once onboarding has been achieved.

Dan Barnes Welcome to Trader TV, I’m Dan Barnes. Today, I’m joined by Joe Everitt, managing director of Stifel Electronic Trading in Europe. He’s going to give us his insights into how to engage with people as a broker to increase execution performance, transaction cost analysis and ultimately better outcomes for investors. Joe, welcome to Trader TV.

Joe Everitt Hi, Dan, thanks for having us.

Dan Barnes So tell us if a buy-side firm wants to engage with you as a broker, what are the first steps they have to do?

Joe Everitt Typically, engagement would be from either the trading desk or a portfolio manager inquiring about our execution services. We’ve got over 2600 clients at Stifel as an organization, so it’s likely an investment manager or the institution will have an existing relationship with Stifel from somewhere, whether that be fixed income, derivatives, ETF sites, or corporate broking or investment banking. Clearly our acquisition of MainFirst Bank AG last year has given us that pan-European base  and wealth of knowledge from a fantastic franchise over there, predominately based in Frankfurt. And then also, of course, we can leverage our US business, so it’s different interests in the US and their client coverage out there.

Dan Barnes How quickly can the traders and the funds that they work for expect to see improved performance? And what sort of metrics is that based on?

Joe Everitt The Stifel technology set up is there to promote ease and speed of access for the clients. Our suite of algorithms will be available to a client, typically through their existing OMS/EMS system. If they are alive and if there is limited testing to do between the counterparties, a client can be set up within 48 hours on some of these systems, so the actual speed or route to market can be very quick. With that, we also have the added benefit of providing clients with algorithm handbooks and guides, so we go through the algorithms we are providing, as it’s a lot to ask of the desk. We are familiar with over 400 algo-parameters and we need to get that information across to our clients as easily as possible. They can be trading very quickly and seeing the benefits of that particular service immediately. We love to get clients off to a great start and see the fills coming in from venues that they may have missed previously, or ways of accessing the market that they may have not been as informed about, by their brokers and how to access these better. So we like to see immediate results, but we’re clearly there for the long haul.

Dan Barnes In terms of transaction cost analysis and the different metrics around that, presumably there’s a huge scope you’re able to measure for clients there too?

Joe Everitt Yeah, exactly. So typically speaking, the electronic trading platform at Stifel will come with intraday post- and pre-TCA analysis. We see that as a big differentiator and a big value-add for our clients. And from those metrics, what we can do is act almost as an aggregator, so we can look across the strategies that the clients are using, we can work out where their best fills are coming from, what venues they’re finding the most success in, and which venues are underperforming. So asking, where are we sending orders but orders not getting filled? That’s something that clients are increasingly interested in. So we can see, very quickly, a graphical representation of where clients are getting fills, where we think we could improve their fill rates and their execution quality, and that is provided to them in real time, and certainly on post- and pre-trade are also considerations as to where we might start to route their orders. So in terms of TCA, we are put on our toes all the time because clearly most clients that come to us already have providers, and so they’re looking for us to offer that differentiator, whether that be the algorithms themselves, whether that be the liquidity they’re seeking, or a combination of this and the TCA analysis that comes with it.

Dan Barnes What do you recommend as the next steps for a buy-side trading head who wants to talk to Stifel about engagement?

Joe Everitt Look at the current service you’ve got provided. You know, have you got ultra-low commission rates? Are they offset by low service levels? Or are there PB arrangements that are limiting your access to particular brokers or a set of brokers? Is the desk open to any slippage or missed opportunities because of this? You know, are you slow to see updates from brokers in terms of new features, their TCA or their simple daily management of your order flow? Have you ever considered other providers in terms of low-touch service that may improve your service levels and help eliminate some of the hidden costs of trading? And then look at the depth and quality of the algorithms that you’ve got offered. Are you able to compare providers well enough?

Joe Everitt Would someone like Stifel provide you with the opportunity, for the first time, to compare your providers, but also get a straight feel for what those providers are doing and how they’re interacting and their algorithms are performing? As an added angle to this, with Stifel having the broker-partnerships platform – which we call SELECT – from that we can make very interesting data available to clients. And then, of course on top of that, you have the differentials which is where most people come in to see us, which starts off as, I’m really struggling in the mid-cap space – what can you do for us in UK mid-caps as a start? And we will go through what we do in terms of using access to retail flow, our experience in that market, how we’ve helped clients navigate those trickier-to-trade mid-cap stocks. What we have done is taken that approach and our experience and applied that to a much wider range of algorithms, and a much wider range of market breadth and coverage, but we’ve still not lost sight of the fact that a lot of clients come to us for specialist knowledge. But if you just come for that specialist knowledge, you miss out on the wider benefits of the platform.

Dan Barnes Joe, that’s been great, thank you.

Joe Everitt No problem, pleasure. Thank you so much, Dan.

Dan Barnes I’d like to thank Joe over his insights today, and I’d like to thank you for watching as well. To catch up on our other shows, go to TraderTV.net and ETF