Money managers that acquire European equity research from
multiple brokerages prefer to trade through Deutsche Bank; the
firm captures first place in Institutional Investors
Trading Team survey. Morgan Stanley comes
in second, followed by BofA Merrill Lynch
Global Research in third.
In conjunction with our 2012 All-Europe
Research Team survey in which we asked buy-side
analysts and money managers to name Europes best equity
research teams in 50 industries, countries/regions and
macroeconomic disciplines we requested that respondents
rank the brokerage firms they use on the quality of trading
services provided and to tell us which firms field the best
overall sales forces. (We tallied responses to the latter
question to produce the All-Europe Sales Team.)
More than 800 investment professionals at some 490 firms that
collectively manage roughly $3.9 trillion in European equity
assets responded to our question about trading services.
With this triumph on the All-Europe Trading Team, Deutsche
Bank scores a hat trick: The German firm also leads this
years All-Europe Research Team (its second straight No. 1
in that ranking) and the All-Europe Sales Team.
Money managers must consume research from more than one
brokerage house, among other eligibility criteria, to
participate in our research team survey.
Clients cite good all-round research product,
sensible risk prices and attentive
service among the reasons they believe Deutsches
trading outpaces all others.
The team is directed by Stuart McGuire, head of cash trading
for Europe, the Middle East and Africa. We provide
execution excellence, competitive risk pricing and price
improvements in turbulent markets, says McGuire, who is
based in London. We also provide leading access to market
liquidity including our dark pool, SuperX. The SuperX European
Broker Crossing System was the largest pool of nondisplayed
liquidity in Europe in December, crossing an average of
363 million in shares a day that month.
Last year the firm launched Stealth 2.0, its
second-generation liquidity-seeking algorithm. Stealth
uses advanced high-frequency alpha models to opportunistically
source liquidity in both bright and dark venues, McGuire
explains. It rapidly captures trading opportunities when
it discovers quality liquidity.
More innovations are in store for this year. We will
be rolling out sales trading algorithms, which increase
efficiency while enabling the high-touch traders to focus on
providing execution excellence, competitive risk pricing and
managing the risk orders, he says.
McGuire notes that trading costs will likely rise this year
owing to increased regulation, shorter reporting timelines and
demand for greater transparency, among other factors.
Trading methods are becoming polarized due to market
stress, he observes. Some clients are leaning
toward sales trading for blocks, risk capital and
expertise while others prefer direct control of their
orders through our algorithms. Also, as flow reduces, clients
are more selective about the trades they pass to the high-touch
desk and they are constantly reviewing their broker lists
meaning brokers need to stay relevant in changing
They have been very helpful in key markets in
Europe, says one New Yorkbased portfolio manager.
Execution and flow are both very good.
Investors also have high praise for the team at Morgan
Stanley. The pan-European trading floor can control and
share between teams, countries and clients all the relevant
news coming through, says one Europe-based fund manager.
People like Gaston Cortijo are very valuable, helping
clients to receive precisely what they want in a timely
Another buy-sider praises the firms transition
management desk. Since all our equity investments are
outsourced to external asset managers, we only directly trade
with brokers if we have significant in- or outflows or changes
in external managers and they are pretty accurate in
their transaction-cost predictions, says this supporter,
who also applauds the teams hands-on and excellent
client service. The traders we deal with are all worth
mentioning: Karin Russell, Gary Spreadbury and Naveen
The 30-member Morgan Stanley squad is co-captained by
Bradley Bilgore, European head of cash equity trading, and
Craig Verdon, head of equity trading for Europe, the Middle
East and Africa; both are based in London and work with
associates headquartered in Frankfurt, Madrid, Moscow and
All of our disciplines cash, electronic and
programs approach the client base as one team,
says Bilgore. This enables us to focus on clients
This structure also is well suited to a region riddled with
sovereign-debt crises. In Europe the macroeconomic
landscape has made trading equities much more complex, he
adds. The cross-product information flow has become
critical for success.
BofA Merrill earns plaudits for its attentiveness to
different order sizes and the overnight order coverage that
extends through 4:30 p.m., says one U.S.-based money
manager. We appreciate our Merrill trading contact,
Nicholas Shepard, who makes available his mobile number to
cover any changes or adjustments on overnight orders. Merrill
also has a strong trading back-office team that has worked with
us over the years to ensure improved trade
Daniel Sanders, London-based head of Europe cash equity
trading, says BofA Merrill employs an integrated global
solution that provides consistent performance and enables us to
be flexible and innovative. This coordinated platform, aligned
with our market-leading alpha generation, delivers significant
value to our clients.
That it does, declares one portfolio manager. What
differentiates BofA Merrill on the execution side is the depth
and breadth of their market share across Europe, and notably
their dominance of flows in the U.K. midcap space, this
respondent says. While a number of bulge-bracket brokers
move increasingly toward a more electronic,
direct-market-access-driven model, BofA appears committed to
protecting its high-touch franchise with a large and
experienced sales trading desk and with that comes
proper know-how and the ability to source liquidity that might
not be available elsewhere.
This client considers Alexander Frosts hedge
fund sales trading team to be unparalleled, with our sales
trader Ross Duncan filtering the noise to highlight the news
and key flows that we actually care about.
Adds another backer: As a fund manager, I want to be
able to trade quickly and efficiently at a price-efficient
level, and BofA Merrills trading operations enable me to
do this. In addition, my sales trading team Michael
OConnor and Alastair Edmonds keeps me in touch
with all the latest market developments.
Staying on top of things is no easy task, Sanders says.
The biggest challenge facing the industry is to continue
to provide liquidity and execution excellence in a low-volume
environment. Both macro and regulatory uncertainty have led to
significantly lower equity volumes, which in turn has demanded
that we continue to develop our trading product and focus on
responding to our clients changing needs.