Tag Archives: etf best execution


ETF Broker Rolls Out Quote Capture Tool for Block Trades

JERSEY CITY, N.J., Jan. 17, 2018 /PRNewswire/ — ETF broker WallachBeth Capital, a leading institutional brokerage firm, has announced the Phase I roll out of its internal proprietary Quote Capture platform. The platform further enhances WallachBeth’s commitment to providing institutional clients the highest degree of transparency throughout the ETF execution process.

WallachBeth has always leveraged the advantages of a competitive quote model to source liquidity for outsized ETF block trades, providing price improvement and increased liquidity in often hard-to-trade and/or illiquid products. In light of clients’ interest in the transparency provided by RFQ (“Request for Quote”) platforms, WallachBeth’s Quote Capture tool allows clients to quantify and validate their price discovery process and satisfy compliance obligations.

The foundation of WallachBeth’s ETF execution business is providing institutional clients high touch access to a full suite of execution strategies, coupled with agnostic advice throughout the trade lifecycle. WallachBeth continues to be increasingly relevant to the broadening number of institutions using ETF products and strategies to achieve their investment mandates. Andrew Mcormond, Managing Director, ETF Trading Solutions, at WallachBeth Capital states, “We always emphasize that best price often goes beyond a block trade. True best execution requires a comprehensive plan that includes experienced consultation, pre- and post- trade analysis and the invaluable expertise of seasoned ETF traders.”

About WallachBeth Capital LLC

WallachBeth Capital is a leading provider of institutional execution services, offering clients a full spectrum of solutions to help them navigate increasingly complex markets. The firm’s expertise includes ETF and equity trading, derivatives, and capital markets. Operating on a fully disclosed, agency-only basis, the firm is committed to facilitating all client needs with transparency and integrity. The firm’s website is located at www.wallachbeth.com.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor  or email: cmo@marketsmuse.com.


Homebuilding ETF Is Falling Down

MarketsMuse blog update profiles speculation surrounding SPDR S&P Homebuilders exchange-traded fund. This ETF reach an eight-year high in February but since then has fallen dramatically. Now investors are taking notice and are trying to make a quick exit. This MarketsMuse blog update is courtesy of Callie Bost and Jennifer Kaplan of Bloomberg Business and their article, “Investors In This Homebuilder ETF Are Heading for the Exits“, with an excerpt below. 

Investors in homebuilding shares are heading for the door.

Speculators in the SPDR S&P Homebuilders exchange-traded fund have pulled a record amount of cash in April, abandoning the ETF known by its ticker XHB after it reached an eight-year high in February. The fund has retreated 4.8 percent since then.

Traders are doubting equity gains have room for improvement as mixed economic reports muddy the outlook for further growth in the industry. The Federal Reserve is moving closer to raising interest rates, adding to concerns just as homebuilders enter the busiest time of the year.

“Housing stocks are in an interesting position right now,” James Gaul, a portfolio manager at Boston Advisors LLC, which oversees $3 billion, said by phone. “We’re in a bit of a logjam for multiple factors. Until this logjam breaks, it’s going to be hard for national homebuilders to have sustained outperformance.”

In April, traders removed $376 million from the fund, the largest monthly outflow since the ETF started trading in 2006. The SPDR S&P Homebuilders fund tracks stocks like Toll Brothers Inc. and D.R. Horton Inc. as well as home-improvement companies including Aaron’s Inc., Tempur Sealy International Inc., and A.O. Smith Corp.

To continue reading about the fall of the homebuilder ETF, SPDR S&P Homebuilders exchange-traded fund, click here

MarketsMuse: This ETF Trading Expert Has This To Say About That…

MarketsMuse.com ETF update is pleased to share an informative perspective about best practices and “best execution” that institutional investment managers, RIAs and others should consider when using ETFs, courtesy of insight from one of the more widely respected members of ETF “agency-only” execution space. Here’s the excerpt of the ETFdb.com interview:

etfdb logoAll walks have come to embrace the exchange-traded product structure as the preferred vehicle when it comes to building out low-cost, well diversified portfolios. Furthermore, active traders have also taken note of the inherent advantages associated with the ETF wrapper, embracing the product structure for its unparalleled ease-of-use and intraday liquidity.

ETFdb.com recently had the opportunity to talk with Mohit Bajaj, Director of ETF Trading Solutions at WallachBeth Capital, about his firm’s role in the industry as well as the evolution of ETF trading in recent years.

ETF Database (ETFdb): What’s your firm’s story? What role do you play in the ETF industry?

Continue reading

Steven Wallman’s Holistic Approach to Trading

MarketMuse update courtesy of ETF.com’s Cinthia Murphy

Steven Wallman was a commissioner with the SEC in the mid-1990s. An authority on securities markets and trading, today he leads an ETF-centered online brokerage, Folio Investing. Wallman is also keen on seeing the SEC start using a thoughtful “holistic” method to evaluate the worthiness of new ETFs as opposed to a more case-by-case approach.

That could have far-reaching effects on the availability of innovative nontransparent actively managed wrappers, Wallman told ETF.com in a recent interview. He held up Eaton Vance and Precidian’s different experiences at SEC in the past few years as each pursues distinct nontransparent active ETFs as examples of a need for a new approach.

ETF.com: Both Eaton Vance and Precidian are looking to launch nontransparent exchange-traded products. They are different structures, but why do you think the SEC approved one and not the other? Is it all centered on their tradability?

Steven Wallman: The Eaton Vance one that has been approved, from what I’ve read, allows people to sort of bid off of the indicated NAV that will be changing on a 15-minute basis during the day. And then you would be bidding a basis point up or down off of that, depending on what you think the market and the securities are doing.

It does have an intraday element to it. Precidian’s was designed more as sort of the equivalent of a nontransparent but actively managed ETF that would allow for intraday trading. But the question is, allow it for what, on what basis? How do you make a decision?

What is the SEC is trying to protect against? What is it that it’s trying to permit? And what actually makes the most sense for it to be able to do? The lack of a holistic, clear outline with a proposal for how they would be addressing this is what seems to me to be missing. And in part, that’s why it’s taken so many years for this to develop and for ETFs, on the active side, to come to market.

It’s a little bit strange how the commission has addressed some of this. Its approach to these new products has been sort of piecemeal without the benefit of an overall theory guiding it.

ETF.com: Has this lack of a consistent approach been a big barrier to entry for active ETFs?

Wallman: It’s clearly been a significant barrier for active ETFs at the moment, and that is evidenced by the fact that there are several that have been attempted for many years and there still are very few of them.

With passive vehicles, that has been run to the ground a little bit more easily. By now, we have a more certain template and model for what would work at this point than for active.

On the other hand, remember that it took passive years to be able to come to market as well. At the beginning, there was no good mechanism that allowed it to slot in. You just had a framework that basically said, “Unless you fit into this one very particular kind of framework, nothing else is permitted unless the SEC provides a waiver.”

We’re in this sort of one-by-one-by-one analysis for all of these, and I think now—and it probably should have done so quite a while ago—the SEC ought to shift to a much more holistic view of what is the whole issue here and how do we resolve it, as opposed to, “This one looks OK; that one doesn’t look OK,” even if it’s hard for people to tell the difference.

ETF.com: Are these nontransparent structures more focused on issuer survival than on investor well-being, and maybe that is what the SEC is concerned about here? Are they just a result of mutual fund companies trying to find a spot in the ETF world?

Wallman: I don’t think so. A lot of the ETF providers at this point are mutual fund companies. Vanguard, for example, has a huge array of ETFs, and they’re certainly a well-known mutual fund company. You also have a number of providers of ETFs that are not mutual fund companies.

The proliferation of ETFs and the rise of them as a good vehicle for certain cohorts of investors to utilize is a good thing for the market. It is a new innovation—or it was a new innovation 25 years ago. It’s an increasingly used innovation.

The fact that there are providers of mutual funds who also want to come up with new vehicles is a good thing. So I don’t think any of this is about survival of the mutual fund industry.

For the complete interview from ETF.com, click here.

WisdomTree Case Study: ETF Best Execution

MarketsMuse editor note: The following post, extracted from Jan 6 submission to ETFtrends.com is best described as an advertorial courtesy of WisdomTree Investments, one of the ETF industry’s leading Issuers. While readers of MarketsMuse might be inclined to muse “[This ‘case study’ is] Elementary, my dear Watson, totally elementary!,” MarketsMuse editors would retort: “You would be astounded by the number of ‘sophisticated’ investment managers who somehow still don’t understand how block trades in ETFs are best executed, and precisely who these managers should be seeking objective guidance from before hitting a “send” button.

Equally important: the below submission makes frequent reference to ETF “market-makers”, a phrase that traditionally infers “proprietary trader who is taking the other side of a customer’s trade in order to extract a trading profit.” In today’s market structure, those who ‘make’ markets also include agency-only brokers, who, unlike traditional “market-makers”, agency brokers perform a similar role within the context of providing best available 2-sided quotes; they act as fiduciaries and specialize in sourcing liquidity from among an assortment of “market-makers. Instead of trading against customers, these brokers act in the interest of customers and simply charge a pre-disclosed commission for sourcing liquidity and executing  the right price. As such, these agency-only experts act in the interests of the customer and [arguably] are the best route for fiduciaries who seek best price based on an aggregation of all available bids and offers that are typically not displayed on ubiquitous, screen-based markets.

Here is the extract of WisdomTree’s submission:

wisdom treeThis blog post is relevant to institutional investors interested in trading exchange-traded funds (ETFs) in significant volume. Individual investors do not always have access to liquidity providers to trade ETFs as referenced below.

What if I told you that a large $500 million order and a smaller $1.2 million order traded in the same ETF, but one executed around the bid/ask spread and the other drove up the ETF price 84 cents, or almost 5%. Could you guess which trade was responsible for each outcome? The answer may surprise you. The $500 million notional block traded in-line, and a small order of $1.2 million notional block pushed the WisdomTree Brazilian Real Fund (BZF) price 5% away from its underlying value. The trades were done on different days and times, but the price of the ETF and its trading characteristics were similar. So what was the difference between the two trades?

On October 9, 2013, a 27-million-share block order worth approximately $500 million executed inside the bid/ask spread of BZF. You can see the trade in the highlighted area in figure 1.

Wisdom Image 1

The client who initiated that trade was able to work with an ETF liquidity provider who had the ability to access the underlying basket in the primary market on behalf of the client. It is important to remember that an ETF is at least as liquid as its underlying securities, regardless of the average daily volume. That demonstrates the beauty of the open-ended ETF structure and its ability to create new shares and redeem shares daily. This trade was successful from an execution standpoint because the client worked together with their trading partners on a best execution strategy.

On the other side of the execution spectrum, another investor entered a 70,000-share ($1.2 million notional value) market order in BZF on November 13, 2014, just before 3:39 p.m. ET. This resulted in a quick spike up in the price of the ETF, as you can see in figure 2.

Wisdom Image 2

In this second example, the order book, or depth of the bids and offers of the ETF trading on the exchange, handled a market order of this size in an inefficient manner. The depth of bids and offers in an ETF order book is not always reflective of the liquidity of the underlying asset. While there is a lot of liquidity in Brazilian Real forwards, there are not a lot of resting orders in the BZF order book. By definition, a “market order” is designed to buy or sell an investment immediately at the best available price on the secondary market and will not stop until completed. For this reason, the order for 70,000 shares swept up all available shares for sale until it was completed, which resulted in the price increasing by almost 5%. This was followed by the price of the ETF correcting back in line with the “indicative value” of the underlying basket. Figure 3, and the yellow arrow, illustrate how quickly the order was filled and how far the price moved to satisfy the 70,000- share buy order in the order book.

You may be wondering, “Isn’t there a market maker who is supposed to be providing liquidity so this doesn’t happen?” The answer is yes. [MarketsMuse editor note: But unlike the days of yore, when stock exchange floor specialists were required to ‘take the other side’ of investor orders within the context of prevailing volume, the ‘new market structure’ does not mean that a market maker must provide any more than that he or she would be willing to buy or sell on either side of the prevailing quote. And, because the “beauty” of today’s electronic markets is that bid-offer spreads can move more quickly than you can blink your eye, a market order typically moves so fast that it may not provide enough time for the market maker to “reload” their bid or offer on the screen before the order has driven up the price significantly.]

In summary, these two examples are something that all ETF investors can learn from. On the Capital Markets Team at WisdomTree, we try to be proactive in consulting with our clients on best- execution strategies. For larger orders, always look to work with a liquidity provider who can access the underlying basket on the clients’ behalf and provide execution close to the “fair value” of the ETF. Lastly, we encourage all investors to be sure to have a full grasp of the depth of the order book before implementing any market order. We hope this information helps investors in future ETF.

For the full article at ETFtrends.com, please click here

Wall Street Women On Top; 2014 Awards Go To…

tradersmag Industry publication Traders Magazine announced last night the 2014 “Wall Street Women: Celebration of Excellence” Awards and recognized 19 of The Street’s Finest Gals across 19 categories, including top gun awards for leadership, mentorship and trading.

Mary Clark, WallachBeth Capital
Mary Clark, WallachBeth Capital

Giving equal accolades to both buy-side and sell-side in the “most-watched” equities trading category, Blackrock’s Vivian Bakonyi, the firm’s”gal- to-go-to” for program trading shared the top slot with the sell-side’s “dame doyenne of ETF best execution,”  industry veteran Mary Clark of WallachBeth Capital.

For Mentor of The Year, Traders Mag judges also came to a split decision, with top honors shared by Citigroup’s MD Of Global Markets Christine Sperry and OhioPERs trader Joan Stack.

The full list of winners is available by clicking on this link to TradersMag. MarketsMuse extends Congrats to ALL of you!!



Traders Follow The Money Trail to Good Harbor: 1st Day of Month Supposedly Signals Market-Moving Blocks

Excerpt from this a.m.’s Wall Street Journal

Across Wall Street, traders take note when big ETF managers like Good Harbor step into the market, moves that can affect prices. At times, they may try to profit by jumping ahead of Good Harbor, potentially chipping away at returns for its investors, people familiar with the market said.

On Monday, February’s first trading session, traders again will be watching for Good Harbor to make a move. [This is because those traders believe that Good Harbor, the $10bil AUM advisor specializing in ETF strategies effects portfolio rebalance strategies on the first trading day of every month.]

“It’s on people’s calendars,” said one ETF trader at a brokerage firm. “Good Harbor pushes a button, and it moves the whole market.”

goodharborGood Harbor manages or advises on $10.8 billion, more than double the $4 billion at the end of 2012, according to the firm’s own tally Good Harbor is one of the highest-profile money managers in the fast-growing ranks that use ETFs to build portfolios, rather than individual stocks and bonds. ETFs are generally low-cost funds, designed to track market benchmarks, whose shares trade on exchanges.

For the full WSJ article courtesy of Chris Dieterich, please click here

ETF Trading Market Veteran Joins Agency-Execution Trailblazer WallachBeth Capital


NEW YORK, Jan. 8, 2014 (GLOBE NEWSWIRE) — WallachBeth Capital, a leading provider of institutional execution services, announced today that ETF industry veteran trader Mohit “Mo” Bajaj has joined WallachBeth in the newly created role of Director, ETF and Portfolio Trading Services.

Mohit "Mo" Bajaj, WallachBeth Capital
Mohit “Mo” Bajaj, WallachBeth Capital

Mr. Bajaj brings over 10 years of ETF principal market-making and global bank trading experience to agency-only brokerage specialist WallachBeth, most recently serving in a senior ETF facilitation role at Deutsche Bank. According to Michael Wallach, CEO of WallachBeth, “Mo further strengthens our core capabilities and his wealth of ETF and portfolio trading expertise will help our clients navigate the increasingly complex and evolving ETF landscape.”

Added Wallach, “Irrespective of the product we are trading or the client we are serving, our process for executing sophisticated trading strategies at WallachBeth is holistic. Our value-add comes from leveraging a combination of deep product knowledge, extensive trading market insight and, most important, providing an un-conflicted human analytical element. Mo is a perfect complement to a seasoned team that is well-recognized for both their capabilities and thought leadership across the institutional ETF and program trading marketplace.” Continue reading

ETF Market Expert Speaks Out: Navigating Turbulence

In the wake of the now spirited debate as to the direction of equities markets, the more relevant topic of how/where to move in volatile markets in order to get real best execution when trading in exchange-traded products is particularly poignant.

We extend our thanks to the folks at NorthStar Financial’s “Advisor Studios” and ETF market expert Andrew McOrmond, Managing Director at WallachBeth Capital, for shedding light on this very topic! Seeing and Hearing is Believing..

How NOT to Execute Your ETF Block Order..Best Ex Memo

Editor note: For those who didn’t get the”Best Ex Meets Worst Ex” memo,  Ugo Egbunike from IndexUniverse spotlighted a block trade in QAI this past Monday that was apparently mangled by the executing broker, illustrating once again that ETFs are NOT stocks, and real best execution requires guidance from a truly-professional trader that actually knows how to execute ETF orders.

Someone got taken to the cleaners on Monday, buying 16,000 shares of  QAI—a trade that highlight the nuances of market-on-close (MOC) orders. They could have avoided it. Here’s what happened, why and how you can avoid it.

At 4:00:00 p.m. ET, around 16,000 shares of the IQ Hedge Multi-Strategy Tracker ETF (NYSEArca: QAI) were executed at $28.83—that’s $1.28, or 4.64 percent, more than its last traded price of $27.55 at 3:59:59 p.m. Eastern time. It was completely unwarranted.

At 3:59:59 p.m. ET, someone was offering 12,800 shares at $27.56. The fund’s underlying value didn’t change in that one second. At the end of the day, its net asset value was $27.50.


Time Exchange Bid Size Bid Ask Ask Size Trade
$28.88 *

* NYSE Arca Market Closing Price                                                                        Source: Bloomberg

The trade was the result of a poorly executed market-on-close (MOC) order. MOC orders for NYSE Arca-listed ETFs are automatically entered into the NYSE closing auction, which is outside of the core trading session.

Unfortunately, orders in the NYSE closing auction are exempt from Rule 611: the Order Protection rule.  The basic idea behind the rule is to protect investors from faulty trades by comparing all nationally placed quotes.

If a better price exists for a market order, it gets routed to that exchange before it can get traded at its current exchange. In the case of the MOC trade in QAI, there was no protection—the trade was exempt because it occurred during the auction and not during the regular trading session.

It seems likely that the buy order was entered as a market order into the MOC NYSE closing auction. Had it been a limit order, the buyer’s limit would not have been $28.83, which means the final execution price would have been great news. Given that the last price was $27.55, a market order must have been behind that terrible trading strategy. Continue reading

European Platform to offer best price for ETFs


An exchange-traded fund platform service has been launched into the UK and European market to help IFAs and wealth managers ensure best execution when recommending clients invest in ETFs.

Laurie Pinto, chief executive of London-based securities research firm NSBO, said the service is being offered through a joint venture between NSBO and WallachBeth, a US inter-market broker.

Mr Pinto said the service, already popular in America, was important for the post-retail distribution review world as it aims to get the best price for ETFs.

He said: “In America each tranche of an ETF has to be put on an exchange, so you can track the price more easily. This does not happen in Europe.

“This puts the end investor at a major disadvantage. This service will aim to educate investors on getting the right price. The service of best execution is a big part of managing money.” Continue reading

ETF Market Mavens March Madness Event-City of Brotherly Love

Expect more than lots of brotherly love networking at the Philadelphia Ritz-Carlton March 19-20, when ETF market mavens gather  to attend the InsideIndexing forum “Risk, Return & Indexing Strategies.”

An early look at the menu indicates a few tasty treats will be served up by a formidable group of moderators and industry panelists who will be peeling back the onion layers  covering fixed income ETFs, how to choose the ETF in every asset class,  and a fav topic “Are arbitrageurs stealing your returns?”

We can’t help but wonder what mutual fund titan and ETF anti-Christ John Bogle will be saying to those that attend, but its always worth the price of entry to hear him opine (the fact that food and a cocktail reception are included in the registration fee makes it a must-attend for those in the tri-state region).

Its great to notice the agenda also includes a Live-Market ETF Trading Session, during which the industry’s top expert brokers will use 40-ft screens to display live market quotes and trading floor video feeds to illustrate how they achieve best execution for their respective clients.

We’re not getting a commish for promoting this event, so feel free to click the program logo below to register 🙂