The TradeTech West 2007 Conference, hosted by Worldwide Business Research, got underway this morning in San Francisco and I will on hand reporting for the next two days on the panels and discussions taking place at the trading event.The opening panel at this year's event focused aptly on best execution and the challenges and pitfalls associated with the hard to define goal.
The question of what even is best execution was of course thrown to the panelists by moderator Brian Fagen, managing director and U.S head of electronic sales at Lehman Brothers and garnered some interesting responses.
The panelists seemed to concur that best execution is an evolving concept and different types of firms evaluate and analyze it differently. Tim Gee, managing director and head of program trading sales for the Americas at UBS, said though that first and foremost it is important to have a process in place in order to review and measure best execution no matter the benchmark or standard it is measured against.
Gregory Treacy, senior vice president and director of sales at NeoNet, agreed and added that transaction cost analysis does not necessary equal best execution. And while TCA is more integral for portfolio and basket trading, on a single stock basis TCA might not be as vital to determining best execution.
When asked if TCA is ever used to evaluate individual traders, Will Weitzman, head trader at Symphony Asset Management, explained that while it can be used at the individual trader level his firm would mainly use the analysis as a way to see where traders can improve. "We would be looking at a scenario where the trader could adapt or do something different...where they can improve," said Weitzman.
Dark liquidity and whether or not it changes the way traders think about best execution was also a hot topic for the panel. "There is definitely an opportunity cost associated with dark pools," said Gee, explaining that trades routed to dark liquidity pools are not executed immediately, which can affect best execution.
He also added that while dark pools are an important execution venue for both the buy and the sell side, details such as expected cross rates and times associated with cross rates would be important data to assist in evaluating best execution.
Stay tuned for ongoing coverage from TradeTech West...