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"Today's Plexus numbers clearly demonstrate, contrary to conventional wisdom, there are strong qualitative differences in how brokers execute trades of small size," said Mike Plunkett, President, North America, Instinet, LLC. "When combined with earlier Plexus work showing that Instinet can deliver some of the best results for block trading in NYSE and NASDAQ stocks, there is no doubt that we do in fact provide a higher-level of service than many other brokers."
Mr. Plunkett continued, "Given Instinet's 35-year track record in electronic trading, smart order routing and our agency-only business, it's no surprise that Instinet dominates other brokers in these smaller trades."
As asset management firms adopt self-directed electronic trading at an increasing pace, the execution quality of smaller-size trades has become a more important benchmark. Electronic trading software often takes larger orders and breaks them up into many individual, smaller pieces to execute.
According to Marie Konstance, Director of Sales and Product Management at Plexus, "This is the first time Plexus had examined broker activity in this category of small size trades for our universe of executions. Money managers use our analyses to help them determine how to use their brokers most effectively. This is important to them because the SEC mandates that managers seek best execution, and because any improvement in trading costs goes straight to an end-investor's bottom line."
Earlier work by Plexus complements Instinet's well-known leadership in the block trading arena. According to Plexus's own comparison of Instinet's block executions to those among its universe of major full service brokers, Instinet ranked No. 1 for all block trades from 10,000 shares to 50,000 shares for the past three consecutive quarters. This applies to U.S. Exchange-listed trades and NASDAQ-listed trades in this category.
In surveying a diverse universe of exactly 883 brokerages, the new Plexus study looked at where buy-side firms could find the greatest "value-added" when it comes to executing small trades (less than 2,000 shares) for both Exchange-listed and NASDAQ trades. To find this "value added" Plexus compared the price of a stock when it was released to the broker, to the price the trader attains when he buys or sells it. Plexus then determined what the price change should have been, and compares brokers on how much better or worse they performed against this benchmark.
To calculate the benchmark, Plexus uses data that includes the market capitalization of the stock, the number of shares traded compared to average daily volume, recent momentum of the stock and trade quantity.
The Plexus study compared the quality of Instinet's small trades (NASDAQ and U.S. Exchange listed trades of 2000 shares or less) to those of almost 900 other brokers, during a period from the third quarter of 2003 through the second quarter of 2004. The study also broke down results into 9 subcategories, comprising liquidity, capitalization, and momentum. In Exchange-listed stocks, the only category in which Instinet was not No.1 was for "adverse momentum" trades. In NASDAQ stocks, Instinet was No.1 based on "value added" in 6 out of 9 categories.
Instinet commissioned the analysis from the Los Angeles-based trading performance consultant.
For more detailed information on Instinet's trading performance as analyzed by Plexus, go to: www.instinet.com/performance
About Plexus Group
Plexus is a consulting firm dedicated to enhancing investment performance by improving the trading process that converts investment ideas into portfolio holdings. Plexus adds value through custom analysis of a client's trading data, distilled into practical recommendations for improving investment returns through better trading practices. Plexus serves over two hundred managers, sponsors, brokers and exchanges, in 14 countries. Plexus is non-broker affiliated and is a subsidiary of JPMorgan Chase Bank.
About Instinet, the Unconflicted Institutional Broker
Instinet, the Unconflicted Institutional Broker, gives its customers the opportunity to use its sales-trading expertise and advanced technology tools to interact with global securities markets, improve trading and investment performance and lower overall trading costs. Through Instinet's electronic platforms, customers can access other U.S. trading venues, including NASDAQ and the NYSE, and almost 30 securities markets throughout the world. Instinet acts solely as an agent for its customers, including institutional investors, such as mutual funds, pension funds, insurance companies and hedge funds. Instinet, LLC is a subsidiary of Instinet Group Incorporated (NASDAQ: INGP) which is part of the Reuters family of companies.
