BNY Brokerage Unveils Direct Execution Services

BNY Brokerage is launching a suite of direct-market access trading services called Direct Execution Services or DEx, which reflects the integration work that BNY has done in the three months since it acquired Sonic Financial Technologies.

The announcement on Monday signals that BNY Brokerage, which is part of BNY Securities Group, a subsidiary of The Bank of New York, has begun an aggressive sales push to convey that it has both self-directed trading as well as an upstairs, broker-assisted desk.

According to Carey Pack, president of BNY Brokerage, DEx is the umbrella organization that encompasses direct-market access as well as access to algorithmic-trading strategies offered by BNY Brokerage.

"What's special about DEx is the flexibility and robustness of the offering," says Pack, adding, "the fact that we cover the auction market as well as the electronic market; the fact that we have access to all the algorithms. It's all part of an agency brokerage offering," he adds.

So far, thirty buy-side customers are signed up and using the direct-market access trading capabilities, according to Pack.

Through DEx, institutional customers can reach electronic communications networks, Nasdaq, market makers and multiple listed equity markets, as well as algorithmic-trading strategies offered by BNY Brokerage. In addition, DEx incorporates BNY Direct ExecutionSM, which provides direct access to floor brokers at the New York Stock Exchange.

Carey explains that BNY Brokerage entered the direct-access trading space two years ago with the acquisition of Francis P. Maglio, a direct-access broker on the floor of the New York Stock Exchange. Then, prior to the acquisition in March, BNY Brokerage had brought Sonic in to power its over-the-counter trading desks. So, it had integrated Sonic into its trading and clearing platform, before it moved to acquire the firm. Since the acquisition, BNY Brokerage has done work to integrate Sonic with order-management systems.

For example, DEx offers a flexible front-end trading tool branded Sonic Port that integrates all the major order-management systems. "If a client doesn't want [BNY's] front-end, they can use their own front-end and send trades to us or reach us via FIX [Financial Information Exchange protocol]" says Pack. The second choice is that clients can use smart-order routing or time slice or VWAP (volume weighted average price), says Pack, adding that the firm offers institutional customers a number of algorithms they can use. "They can either tap into our algorithms or use their own," he says.

With the consolidation occurring in the direct-access trading space, players like Lava Trading and Sonic Financial Technologies have been snapped up by brokerage firms that are eager to jumpstart their own electronic-trading capability, notes Randy Grossman, research manager, capital markets at Financial Insights.

BNY Brokerage announced that it was re-branding the electronic-trading capabilities it acquired from Sonic Financial Technologies approximately two weeks after Citigroup said it was acquiring Lava Trading.

"The acquisition of Lava took out what we think is another pure independent," says Pack. "When you line up everybody who is providing these services, there's no other independent agent who's backed by a bank the size of Bank of New York," he claims. He also notes that BNY Brokerage is part of BNY Securities Group, which includes Pershing, which together comprises the bank's agency brokerage and clearing business.

Unlike other competitors, Pack emphasizes that BNY Brokerage does not do proprietary trading and it does not own an ECN, and that it operates in an "un-conflicted agency capacity." Pack says that a number of other firms it competes against first try to match trades against ECN books they are affiliated with, and route orders there, or they have market-making and proprietary-trading groups which have "inherent conflicts."

But Financial Insight's Grossman says this is not unusual, noting that Instinet delivers the same message. "I find that interesting, and that's something that Instinet has been telling people for many years. I worked for Instinet for 12 years," adds Grossman, who was previously head of global portfolio trading there before joining Financial Insights recently. "That was one of their pitches. We're un-conflicted and totally neutral and that is still the case at Instinet," he says. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio