The Death Of Execution


In the days before the new millennium, electronic trading was hardly widespread. All asset classes, from options to equities to swaps, were in the business of high touch trading. There were no retail products like E Trade of TD thinkorswim – you called a broker, told them your order and prayed for a fill.

Those days are essentially over, save perhaps for the complex order that requires multiple sources of liquidity. “Execution doesn’t matter anymore,” explained James Wanstall, chief executive officer of Canadian hedge fund BluMont Capital, at Markets Media’s 2012 Canadian Trading and Investing Summit.

Wanstall explained how execution was essentially irrelevant these days. Any sellside broker can compete on price and speed. Those factors are essentially blurred these days since pricing is so competitive; large brokers are also at the forefront of technology to the point where microsecond execution times are increasingly meaningless. “The law of diminishing returns is upon us,” noted CNSX Chief Executive Richard Carleton.

With execution all but dead, the real value that a broker can provide comes from additional and auxiliary services such as insightful research and trading platforms.

“I was getting research that was really in depth from my broker. Eventually, that disappeared and I asked if they had replaced the guy with someone new. They said no. I was dumbfounded as to why they’d do that,” Robert McWhirter, chief executive officer of Selective Asset Management, said.

One things brokers can do these days is work on building real relationships on the phone and in person. While face-to-face meetings seem to be going the way of the dinosaur, there’s still time to save face and clients.

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