Exchanges

Most Innovative

The exchange categories were highly competitive, reflecting the industry itself. For most of the categories, responses were somewhat dispersed across a number of exchanges, making it difficult to select winners.

Direct Edge (WINNER, see profile) gets the nod for most innovative exchange operator. The firm “has done a very good job at creating innovative market structures,” said one sell-side electronic trader. “Through EDGA and EDGX, they have different models to provide interesting opportunities in trading and also support a rich set of order types.”

Some market participants said Direct Edge is especially innovative in its pricing structure. “It may be the most complex, but they get as creative as anyone,” one person said. According to another source, “their pricing is probably the most keen and most fair.”

Bats won acclaim. One source noted “Bats has a second book and they have come out with size priority. They have real-time latency modeling on an order-by-order basis.” Another source likes Bats’ “range of order types and the way they have been able to grow business win market share regardless of the environment,” while another said Bats “has an open philosophy and doesn’t charge for fees. They have a high focus on low latency.”

CME Group was cited for innovation, “given their EM strategy and what they’ve achieved with Bovespa and Bolsa Mexicana,” according to one source. Another market participant likes “what IntercontinentalExchange is doing with regard to the OTC space and swaps. These guys continue to think out of the box…they are very innovative and they have done very well over the past year.”

“BOX Options Exchange is the most creative in terms of new business models, such as fees,” one source said. Another opined, “I would give NYSE Liffe U.S. the award for most innovative for their work on single-pot margining. While not yet proving to be highly successful, it was very innovative in both creation and execution.”

Chicago Board Options Exchange, whose volatility index (VIX) is considered the gold standard for exchange innovation, probably would have run away with this award in previous years. “They have been the most consistently innovative,” one source said. Other exchanges lauded for innovation in 2012 were NYSE Euronext and Nasdaq OMX.

Best Exchange Technology

Bats (WINNER, see profile) wins the gold for best technology. “Hands down, they are the fastest and cleanest,” said one one sell-side source.

The award “is kind of ironic considering the flub of their own IPO,” another source said. “But outside of that little glitch, they have the best technology.”

As another market participant explained, “they had a pretty major snafu (last) year, but it ‘fessed up to the snafu and it is one of the first exchanges to implement kill-switch-like technology. Market participants and brokerage desks should do everything they can to make sure their automated trading is safe, but a big part falls on the matching-engine technology at the exchange.”

CME was mentioned multiple times for top-notch technology. “I like the way Globex works,” one source said. “The controls it has over trading I think are best.” NYSE Euronext, through NYSE Technologies, “has excellent technology for handling historical market data,” another person said.

Nasdaq OMX, ICE, and International Securities Exchange were also praised for their technology.

Best Futures Exchange

CME (WINNER, see profile) wins the prize, beating out ICE.

“We are big fans of CME as an overall offering, the whole package,” one source said. “We at least get the sense they’re taking our needs and wants into consideration, and then coming up with a pricing structure and bringing out products we’re interested in. It’s not some guy sitting in a cubicle, throwing stuff at the wall to see what sticks.”
Another source said CME deserves praise for its handling of the MF Global failure. “The organization that handled their crisis the best was CME. Nasdaq, NYSE and others all had a crisis or two, but CME managed their failure the best.”

Other market participants said CME “is very hands-on with client services and client education,” and “is probably best of the broad-based exchanges in terms of overall technology design and execution.”

“Best overall would have to go to ICE for their continued growth through product creation and clearing genius,” one source said. “Coupled with their uncanny ability to see what their customers needs are and meet those needs quickly, they are at the top of the game.”

“ICE’s volumes are up because people are doing more transactions with futures and commodities, while equities volumes are down,” said another source. “A big part of the reason why ICE is acquiring NYSE is because of NYSE’s London-based derivatives exchange, Liffe.”

Most Influential Exchange Leader

There were a fair amount of nominees for the most influential person in the exchange space, but it came down to a two-horse race between Duncan Niederauer of NYSE Euronext and Jeff Sprecher of ICE. Given ICE’s planned buyout of NYSE Euronext, Sprecher has a bright future in this category, but for 2012 the choice is Niederauer.

“I don’t think anyone is more influential than that guy just because of the size of NYSE, its reach, the companies listed on it, and the Euronext connection,” said one source. Another person cited Niederauer “because of NYSE’s impact on sentiment, and also his involvement in the Deutsche Borse and ICE non-deal/deal.”

A forward-leaning supporter of the ICE chief executive said “most influential would have to go to Jeff Sprecher. As the king of clearing and soon to be swaps now with a deal to buy NYSE, I cannot think of anyone more deserving.”

Honorable mentions include Bill Brodsky, CBOE chief executive; three representatives from CME: executive chairman Terry Duffy, Jennifer Ziehe, who leads client relationships, and former CEO Craig Donohue; Joe Ratterman and Chris Isaacson, CEO and COO respectively of Bats; Gary Katz, chief executive of ISE; Steve Crutchfield, head of NYSE Euronext’s options business; and Saro Jahani, chief information officer at Direct Edge.

Best Buy-Side Dark Pool

“From a buy-side equity perspective this almost certainly is Liquidnet (WINNER, see profile),” said a market source.

Another person went into more detail. “When you look at who’s delivering the most value in the space, it’s Liquidnet,”he said. “At the end of the day, nobody is crossing small caps and mid-caps they way they do it, which gives the most benefit back to the end user. The desk does an amazing job with illiquid names. They’re not the most innovative, but overall it’s hard to beat Liquidnet.”

Others mentioned in this category were Bids Trading (“they have a pretty extensive list of functionality for not only buy side but also the sell side”), PDQ ATS (“they are one of the most unique business models we’ve seen be successful, they are really quite innovative”), AX Trading (“often the newest, coolest idea takes a while to get traction and give off end-user benefits. AX is innovative”), Chi-X, and Level ATS.

Technology

Best Buy-Side OMS

Order Management Systems, Execution Management Systems, and Order and Execution Management Systems were some of our most highly competitive categories, as end users offered up multiple providers as their go-to products.

Fidessa (WINNER, see profile) gets the nod as best buy-side OMS. “Fidessa has done a great job at creating an enterprise global solution,” one user said.

“On the software side, Fidessa ranks very high,” said another market source. “They are broker- neutral and client-service oriented, with great technology that adapts quickly and is flexible and stable.”

Bloomberg, Charles River, and Linedata won significant praise among buy-side OMS users, while Indata, Omgeo, and Silexx Obsidian also had their fans.

Best Buy-Side EMS

Portware (WINNER, see profile) gets the prize for best buy-side EMS. The product offers “easy customization for each user’s unique requirements,” one source said, while another noted “exciting new leadership has the company re-energized.”

One institutional trader said RealTick “helps me achieve best execution. The algorithms that are loaded by different brokers are timely, flexible, and highly configurable, which is a key point. It’s stable and it works.”

“Bloomberg EMSX is popular because it’s cheap—it’s essentially free if you have a terminal,” one source said. Another person said Bloomberg “is as creative as anyone in this area, and their products offer value.”

Instinet’s Newport “blows away the competition on functionality and customized solutions,” said an online respondent. “The system is visually easy to navigate and they have a much broader offering than others.” Another source liked Goldman Sachs’ REDIPlus and noted the product is about to become independent.

Eze Castle won praise, especially for its hedge-fund product.

Best Multi-Asset EMS

FlexTrade (WINNER, see profile) is best here. One source likes the product’s “flexibility and ability to adapt to changing needs.” In a business built on relationships, another market source simply but notably said “I like Max” (Palmer, FlexTrade’s director of algorithmic solutions).

Best OEMS

Charles River Development (WINNER, see profile) may have first-mover advantage in this comparatively nascent business line. “I am an over-the-top huge fan of Charles River,” a buy-side trader said. “It is by far the best-in-class system, designed with a great understanding of the workflows of an asset manager.”

Portfolio Management and Accounting Systems

One buy-side trader we spoke with likened his work to a three-legged stool. One leg of the stool is trading, which is supported by order and execution management systems; the second leg is investment operations, which spans performance calculation, portfolio management and accounting systems; and the third leg is investment analytics, which is enabled through services such as Bloomberg and FactSet.

Advent Software (WINNER, see profile) was recognized as the sturdiest second leg of the stool for its Geneva and Advent Portfolio Exchange products.

“Advent APX is the primary accounting investment and portfolio system in our company,” one institutional buy-side trader said. “It’s designed as a fully integrated client-service investment accounting and reporting suite. To do what this does, other firms have to go to best-of-breed performance systems and reconciliation. It is a fully integrated suite of all tools needed to run an asset-management shop.”

“In fund accounting, Advent Geneva is a major player in firms with above $5 million” in assets under management, another source said. “Because of risk management and reporting requirements, money managers using multiple fund administrators need to set (net asset value) internally, so they use Geneva and Advent APX.”

Another market source said “Advent does a super job.”

Other second-leg providers named include Northern Trust Hedge Fund Services, which a source noted “was created when NT acquired Omnium from Citadel in 2011, and is emerging as a strong competitor to Advent.”

One source said SunGard InvestOne is strong in the institutional-investment space; Firm58 and Eagle Investment Systems’ Eagle Pace also received positive mention.