The Wave of Transparency is Upon Us

Today, Traders Magazine Online posted a story by John D’Antona Jr, entitled “Buyside Wants More Transparency of its Orders.”  According to the article, “traders expressed these views on order routing disclosure on a panel at last week’s Investment Company Institute’s conference on equity trading in New York.”  They go on to say that “daily disclosure of trading and routing data is fair and reasonable.”

So why hasn’t the sellside provided this information to their trading clients?  The sellside firms generically referred to in the article claim that “[t]racking orders can be an arduous and time-consuming task…getting data from all the trading venues can increase the likelihood of information leakage, which compromises brokers’ desire to maintain customers’ privacy.”  I think that argument has little merit.  I believe the reason why sellside firms cannot provide, and do not provide this information is because they don’t have the middle office in place to capture, normalize and provide secure access to their buyside clients.

Brokerages need to provide this access and flexibility in order to keep its client base and protect revenue.  The buyside wants to use this information, in part for compliance to see “where brokers receive rebates…[to] determine if the brokers are meeting their best execution obligations.”  Those brokerages who do not provide daily access to this information risk losing their trade flow.  As important, transparency and compliance obligations are growing and I can foresee a world very soon where in near-real-time, brokerages will have to make available this information to it’s customers.

It’s time for brokerages to quit limping along with outdated and ineffective spreadsheets and invest in technologies that have been around for the better part of the last decade.  Falling behind isn’t an option.