Institutional investors are more likely to get best-execution for their large U.S. equity orders with New York-based Morgan Stanley, Rochdale Securities LLC and Goldman Sachs Execution & Clearing LP or Boston-based Fidelity Capital Markets Services.
These four firms top Investment Technology Group Inc.s latest Plexus BrokerEDGE Universe survey for 2006 in their respective categories: full-service brokers; firms that provide research, including soft-dollar services; and firms that provide trade execution only. (Goldman and Fidelity Capital were tied in the latter category.)
Both Morgan Stanley and Rochdale occupied the top spots in ITGs prior four-quarter survey for the period ended Sept. 30, 2006, while Fidelity, a unit of National Financial Services LLC, moved up one rank over the same period.
Long-term comparisons for the survey, which is compiled from trade data contributed by ITGs clients, are not available because ITG changed methodology following its January 2006 acquisition of Plexus Inc.
In all, the Plexus BrokerEDGE Universe is a transaction database of nearly 7 million trades with an estimated value of about $3.3 trillion. The ranking is based on the top 30 firms by dollar volume in each of the three groups for large trades of more than 10,000 shares.
Transaction cost performance is measured by the difference between the price at the time when an order is placed, or benchmark price, and the price at the time when an order is actually executed.
In the bulge-bracket category, Morgan Stanley delivered a performance of an average -1 basis point, while Goldman was second, with
-2 basis points, moving up from the fourth spot in the prior survey. UBS and Citigroup Global Markets Holdings Inc., both in New York, tied with -3 basis points. UBS held steady at number three while Citigroup moved up from number seven in the prior survey.
In the research/specialty firm group, Rochdale retained the lead, outperforming the benchmark by 12 basis points, followed by Pershing LLC, with 2 basis points, moving up from the fourth spot. Pershing is an affiliate of the Bank of New York Co.
Fidelity Capital and GSEC led the pack in the execution-only category, both beating the benchmark by 10 basis points each. Fidelity advanced one spot, and GSEC two.
For small trades of less than 10,000 shares, best execution was achieved by Sanford C. Bernstein & Co., New York, with -5 basis points in the full-service group. Bernstein moved up one rank, while UBS slipped to second place, with -6 basis points. Also for the small trades, Raymond James & Associates Inc., of St. Petersburg, Fla., is the best performer among the boutique firms with 2 basis points, while in the execution-only category, UNX Inc. in Burbank, Calif., topped the list with 3 basis points.
The survey also ranked brokers in the three categories according to their overall performance regarding execution cost, most difficult trade and commissions, for both small and large trades.
Several firms already mentioned for their best-execution performance figure prominently on that list, as is to be expected.
The most difficult trade section, however, includes a number of others that excel. Bear Stearns Securities Corp, New York, tops the list among full-service firms for large and small trades, followed by Merrill Lynch & Co. for large trades and Banc of America Securities LLC for small trades.
Among execution-only firms, Archipelago, now a unit of NYSE Euronext, leads for both large and small difficult trades, followed by Pulse Trading Inc., Boston, for large trades and White Cap Trading, New York, for small trades. RBC Dain Rauscher Inc. of Minneapolis, Minn., and Friedman, Billings, Ramsey Group Inc., in Arlington, Va., are the best performers in the boutique segment.