Equities trading: Bidding for programme trades
New service aims to introduce competitive auction for programme trades.
A new service that could increase competition for programme trades opens in London this July.
The web-based service, called BidRoute, hopes to help fund managers automate the cumbersome process that they have to go through to get quotes for their programme trades from brokers, allowing them to share information with more brokerage houses while introducing a competitive auction for the business.
"Forty percent of equities trading in the US and Europe is done through programme trades but the business is overwhelmingly dominated by just three brokerages, which have over 70% of the market," says Barry Marshall, one of the founders of BidRoute, and former chief operating officer of the investment division of Gartmore. "Part of the problem is simply that it is very difficult to send out the information about the trade to more than two or three brokers because the process is manual and time-consuming, which means a lot of brokers that might have good prices miss out. This makes it very difficult for fund managers to know if they are getting a good price and to demonstrate best execution."
BidRoute has devised a number of functions for fund managers, including electronically ascribing stock characteristics to keep the portfolio trade masked, a search function of all relevant brokers on its books, and a public or private auction setting.