Waters Rankings 2014: Best Performance Measurement and Attribution System Provider — ConvergEx Group

Joseph Virgilio, Dwight Gooden, and Pamela Cheng

New York-based ConvergEx Group, a provider of brokerage and trading-related services, emerged top in this year’s performance measurement and attribution provider category, a win that will undoubtedly raise a few eyebrows, not because of PerformEx’s outstanding achievement, but rather because of the category in which it emerged top. The PerformEx platform, initially launched back in 2007, is something of a misnomer: Yes, it measures performance, and it carries out that function with aplomb. But it isn’t a performance measurement and attribution tool in the traditional sense—it wasn’t conceived as a buy-side-specific application used to measure the performance (return) within a portfolio, its comparison against a specific benchmark, and the source (attribution) of that performance. Instead, it measures performance in terms of the quality of executions attained by user-firms, which means that it is, in everything but name, a transaction-cost analysis (TCA) tool. In other words, if it looks like a duck, swims like a duck, and quacks like a duck, then it’s probably a duck.

Transaction-cost analysis is all about measuring and monitoring “slippage”: unanticipated or hidden costs incurred at various stages of the trading lifecycle, which typically include direct costs like commissions, taxes and settlement costs; and indirect costs, like timing delays (the delay between when a buy or sell order is placed with a broker and when the order is “worked” or executed), market impact (the price movement against the end-user when a buy or sell order is being worked), and various missed opportunities also known as opportunity costs.

When it comes to TCA functionality, PerformEx has few peers, offering traders a range of views of their orders, including details by multiple destination routes; shares sent, filled and unfilled by route; the percentage of orders sent to each route; executions at each price point in the market; and heat maps of every child order—all in real time.

ConvergEx entered this category in good faith, and such are the vagaries of democracy, that it easily garnered enough votes from Waters’ readers to pull off the win. In fact, the result was never in any doubt. However, what will be interesting next year is the outcome of the tussle between PerformEx and ITG’s TCA tool, winner of this year’s best TCA system provider category (see page 45).

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