Brokers should give their clients more algorithm performance data so they can compare products more easily, according to Michel Debiche, president and CEO of US statistical arbitrage hedge fund Quantia Capital Management.
Speaking on a panel at yesterday’s TradeTech Liquidity event in London, Debiche challenged brokers to prove the value of their execution algorithms by allowing the buy-side to see “unbiased” performance statistics, after an audience member pointed out that it was difficult to compare broker algorithms like-for-like.
“If you really provide a competitive advantage, then you should open up your execution database and allow people to do a real comparative analysis,” he said. “It’s great to have all your cards in front of you and say, ‘I’ve got the best hand in the world – trust me.’ But it’s another thing to show your hand.”
Other panel members also indicated interest in comparing broker performance. Jacques Sterck, global head of Dexia Asset Management’s dealing desk, called for more standardisation of algorithm types. “Each broker has its own version,” he said. “It is a little bit of a black box – we cannot compare these algos to compare the performance of brokers.”
Heike Gregowzewski, team head of European equity trading at RCM Allianz Global Investors, would like to see greater clarity about the measure of VWAP used by brokers. She said that although brokers are no longer trading only on primary exchanges, the VWAP calculation used to measure brokers’ performance is based on primary exchange activity.
“We need more standardisation in this respect,” she said. “If it is true brokers are trading on average two basis points better when using Turquoise and other venues, and we got the normal VWAP, my question is, ‘Where are those two basis points?’ I would like to have transparency.”