Morgan Stanley dominated the competition in Institutional Investor’s 2018 ranking of the best execution firms on Wall Street, proving its traders can handle a more volatile market environment.
The firm snagged the top spot in all three of the survey’s main categories, holding onto its first-place finishes in electronic and high-touch trading while leapfrogging above Credit Suisse and Bank of America Merrill Lynch in portfolio trading.
This year’s ranking comes at an interesting time for the market: While U.S. equity prices continue to soar, a return of volatility has resulted in shakier ground for investing. As of midday on Tuesday, the volatility index had increased by roughly 21 percent year-over-year, from 12.04 to 14.66.
The 2018 All-America Trading Team was decided by over 350 buy-side traders and other investment professionals at asset management firms investing in U.S. equities. Institutional Investor asked these pros to rank the best firms at trading and execution services across three main categories: electronic trading, high touch trading, and portfolio trading.
In electronic trading, firms were judged on access to large electronic blocks of liquidity, customized trading algorithms and support, pre- and post-trade cost analysis and execution consulting, among other attributes. In this category, ITG placed second after Morgan Stanley, and BofA Merrill Lynch came in third.
ITG’s chief executive officer, Frank Troise, said his independent trading firm is eyeing a larger market share in the wake of European regulation requiring separate payments for research and execution.
“Our goal is delivering unmatched client service and best-in-class products in our four key offerings: execution, liquidity, analytics, and workflow technology,” Troise said via email. “We are well-positioned to capitalize on the increased global focus on best execution and performance measurement, particularly as more institutional investors unbundle execution from research and seek liquidity via innovative technology solutions.”
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Meanwhile, in the high-touch trading category, the top firms were recognized for their appetites for risk trades, access to large- and small-cap block liquidity, and ability to minimize market impact, among other attributes. J.P. Morgan ranked after Morgan Stanley in this category, while Goldman Sachs placed third.
For portfolio trading, firms were selected based on their ability to offer easy trade reporting, insightful research, and transparent trade execution. Here, Bank of America Merrill Lynch placed second after Morgan Stanley, while Credit Suisse was No. 3.
The voters were also asked to rank the top firms across three sub-categories: market structure insight, research, and consulting; overall flow insight, trends, and market structure; and special situations coverage, which includes merger arbitration, spin-offs, activism, and distressed assets.
In addition to ranking first across the three major categories, Morgan Stanley was also voted No. 1 for its market structure insight, research and consulting. Meanwhile, UBS snagged the top spot for its overall flow insight, trends, and market structure, while Goldman Sachs came in first for its special situations coverage.
