Broker Votes Get Quant Clarity
Data-driven broker votes make sure that sell-side relationships don’t fall by the wayside.
Whether preparing for MiFID II or implementing best practices, buy-side firms are enhancing their broker votes with quantitative data regarding the brokerage research that they consume.
“A lot of what is happening under MiFID II in Europe really is a formalization of what are best practices in many firms,” said Mike Stepanovich, CEO of ONEaccess at Visible Alpha.
The ultimate goal of adding a research-valuation process to the broker vote is to have the clearest picture of which broker resources the firm has consumed before the vote.
“If firms purely rely on the qualitative outcome of their broker vote, they actually might stop some meaningful broker relationships that they are unaware of,” he said.
Stepanovich has seen a large number of requests for proposals come across his desk since ONEaccess launched its broker-vote platform in the third quarter of 2016.
“I think that it gives you and indication as far as where people are,” he said. “I think a lot of people are out there kicking the tires on different vendors to see what is a good fit for them.”
Stepanovich expects that many asset managers will select their broker-voting platform in the second quarter so that they can spend the rest of the year deploying and testing the system in preparation for MiFID II’s January 1, 2018 deadline.
“The tier-one and tier-two asset managers are very active in this space,” he noted. “If their firm is large and complex, they need to get ahead of this because their implementation will take them a little longer to execute. Tier-three firms might be picking this up midyear for completion by year end.”
However, Stepanovich also has seen numerous money managers already populating their updated systems with data from 2016 and 2017.
“This isn’t about getting things set for the future so I can have this evaluation going forward,” he added. “A lot of this is putting it place now so that I have a better understanding of which brokers I’m going to maintain relationships with going into next year.”
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