Traders Seek Better Fill Rates: Wolverine
Wolverine Execution Services (WEX), an independent broker-dealer specializing in the execution of equities, options and futures, is experiencing demand from traders who want to be able to compete with high-powered trading but lack the deep pockets and technology expertise.
“We are seeing more demand from our clients, continuing into 2014, for more sophisticated trading tools,” said Joseph Sacchetti, managing director at Wolverine Execution Services. “Clients want to be as savvy as the cutting edge firms that have invested millions of dollars in technology to support their market making or other trading efforts.”
Sacchetti continued, “It’s very hard to compete in a more complicated landscape when you’re not knee deep into technology. WEX has leveraged almost 20 years of knowledge and expertise in trading and technology to provide our clients with tools that allow them to compete on a level playing field.”
In addition to its proprietary trading platform, WEX offers high-touch market access via its floor brokerage and institutional trading desk. The combination of direct linkage to options and equities exchanges, relationships with exchange and market makers, and access to alternative sources of liquidity, enables WEX to source liquidity with minimal information leakage and market impact.
“We have a high-touch desk where we service clients when the liquidity they’re seeking is greater than what’s provided electronically in the marketplace,” Sacchetti said. “This is where the desk can add value by accessing our network of liquidity providers to mitigate market impact and achieve best execution.”
One of the most discussed subjects in options this past year has been declining fill rates when sweeping markets. “With more options exchanges and rules, we’ve heard from many clients that during 2013 they’ve seen fill rates go down significantly,” said Sacchetti. “Firms are saying, ‘There’s 1,000 on the screen. I hit the bid, and I only get 400. What can you do for me?’”
WEX has options algos that are helping clients improve their fill rates. “Our fill rates average in the upper ninety percent range when fanning out to a few exchanges to the lower nineties when we have to fan out to all exchanges for liquidity,” said Sacchetti. “We have a team of quants and programmers looking at the evolving market structure to maximize fill rates.”
As a result, clients are looking to providers like WEX, that have been successful in maintaining very high fill rates, to assume this complicated responsibility for them.
“It’s become extremely onerous to manage all that connectivity, memberships, etc. and this is driving firms to WEX, leverage our technology, memberships and expertise,” said Sacchetti. “It’s simple enough to trade on a single exchange, but because we have 12 exchanges now it’s much more challenging.”
WEX is enhancing products and performance with innovations such as The Wheel, which allows clients to see how equities algos stack up against each other.
The WEX Wheel allows a client to route equity orders to different broker algos and measure their head-to-head performance and helps them manage the allocations to their various brokers. “We will provide metrics to show the slippage of each algorithm versus the others, so our clients can change the percentage of orders going to each algo based on their performance,” said Sacchetti.
Clients can compare all of their different algos, including WEX Best X, a leading arrival price algorithm. “There is more demand from our customers for these tools given the compliance and regulatory scrutiny on best execution,” said Sacchetti. “This analysis allows them to go back to regulators when they’re asked about their decision process and justify why an algo was selected.”
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