Waters Rankings 2014: Best Agency Brokerage — Instinet

Going back to its direct market access (DMA) roots, Instinet’s award represents a triumph of pioneering as well as perserverance. Indeed, on both a people and a business level, change has proven the theme for technology at Instinet in the past year—from new connectivity introduced with Nomura’s electronic futures trading platform via Instinet’s Newport EMS and the hiring of Tony Necakov in April as Instinet CTO, to a number of expansive adjustments for the Chi-X Global franchise that it owns in consortium, and a focus on new Asia-Pacific markets, such as the Philippines.

Still, the brokerage’s bread and butter—providing as many tools to search out liquidity in as many locations as possible—has remained exactly the same, including the recent addition of an intra-day, last-hour volume-weighted average price (VWAP) cross option on its Crossing alternative trading system (ATS), and the global introduction of its MAKE algorithm, which uses Instinet’s signal-driven FADE logic to reduce adverse selection and signaling for “passive side” trading, which is common among institutional investors. All of this is to say nothing of Instinet CBX, the firm’s dark pool, which took home the award for the best crossing network provider.

The fact remains that a great agency-only firm remains vital in today’s markets. While relationships are important for any brokerage, their services are ultimately judged by a surprisingly straightforward criteria: Was the algo or cross useful, and can that route remain effective? Likewise, as participating, external sell-side venues come under greater regulatory and even prosecutorial scrutiny, the buy side has come to rely on Instinet not only for liquidity access, but for its expertise navigating a trading landscape that is constantly in flux, both operational and reputational.

For this reason, the space remains highly competitive, as it should be. But little about Instinet’s strong direction in 2014 suggests its crown will be easy to take.