Institutional Brokerage Research Articles

Institutional Brokerage Networks: Facilitating Liquidity Provision

Abstract We argue that institutional brokerage networks facilitate liquidity provision and mitigate the price impact of large non-information-motivated trades. Using commissions, we map trading networks of mutual funds (institutions) and their brokers. Central funds (institutions) tend to outperform their peripheral counterparts in terms of return gap (execution shortfall). This outperformance is more pronounced when funds experience large outflows and for large trades in less liquid stocks. Central brokers can deliver superior trade execution compared to peripheral brokers, but mainly for central institutions. We use the collapse of Lehman Brothers as a quasi-natural experiment to establish the likely causality of our findings.

Statistical Innovation in the Global South

Abstract This article proposes a comparative socio-economic history of quantification in Ecuador, Brazil, Ghana and Sierra Leone. It narrows in on censuses in the Global South as sites of methodological and infrastructural innovation in the context of global circulations of model population data systems, methodological standards, and material infrastructures. Specifically, the authors ask which arrangements of actors, norms and settings are involved in the reception, translation and adaptation of statistical innovation and how uneven relations and compositions of power between and within these fields shape the process of transmission. Distilling from their explorative, hermeneutic approach, the authors explore the mechanisms that link variously positioned political fields (Bourdieu, 1985) in the production and implementation of statistical innovation in the Global South. Four mechanisms are identified that shape statistical innovation as process of reception of globally circulating models and ideas as well as their adaptations into specific fields, all of which have differentiated effects and play under certain conditions in parallel or combined ways: 1) interventionist impulses from international organizations, 2) commercial and institutional brokerage, 3) initiatives from local professional communities, and 4) effects of political instabilities.

Institutional Brokerage Networks: Facilitating Liquidity Provision

We argue that institutional brokerage networks facilitate liquidity provision and mitigate price impact of large non-information motivated trades. Using commission payments, we map trading networks of mutual funds and brokers. We find central funds outperform peripheral funds, especially as measured by return gap. The outperformance is more pronounced when trading is primarily liquidity-driven. The centrality premium is strengthened by brokers' incentives to generate greater revenues and their repeated interactions with funds. By merging daily transactions with quarterly holdings, we confirm that centrality premium is driven by reduced trading costs, rather than higher interim (intra-quarter) trading performance or profitable information from brokers.

How has the Relevance of Institutional Brokerage Changed?

AbstractInstitutional brokerage rates have been in decline. We investigate whether this reduction has coincided with a fall in benefits provided by brokers to institutional asset managers. We use trade packages from both active and passive equity funds from 1995 to 2001 and active equity funds from 2002 to 2010. We find that later period active funds recoup a combined 1.75 basis point benefit (from price impact cost recovery and short‐term alpha) per basis point of brokerage cost. Later period active investors saw improved trade price impact and shorter‐term alpha net benefits, relative to earlier period active investors. These results are robust after controlling for trade characteristics and cross‐sectional variation over time. Our findings suggest that brokers innovate to provide valuable services in the subsequent, lower brokerage environment.

Asymmetric effects of sell-side analyst optimism and broker market share by clientele

This paper provides evidence for the first time on how different broker clienteles react to earnings forecast and stock recommendations. Greater trade volume is found to be associated with optimistic earnings forecasts while stock recommendations are stronger for analysts affiliated with retail brokerage firms than those affiliated with institutional brokerage firms. We also find that the market share of buy volume (that is, volume from buy orders) substantially rises on recommendation upgrades while the market share of sell volume rises on recommendation downgrades, and that this effect is stronger for retail clientele.

The Value of Institutional Brokerage Relationships: Evidence from the Collapse of Lehman Brothers

Using the sudden collapse of Lehman Brothers as a natural experiment, we examine whether mutual funds derive value from their institutional brokerage relationships. We find the impact of a damaged institutional brokerage relationship is greatest among mutual fund clients with concentrated brokerage networks and funds that specialize in small-cap stocks. Based on a difference-in-difference analysis, we find a drop in monthly fund alphas ranging from 34.2 and 70.9 basis points per month in risk-adjusted returns arising from a weakening brokerage relationship. Collectively, our results support the view that mutual funds significantly leverage their relationship capital with brokers.

Brokers and Institutional Investor Trades

Institutional brokerage rates have been in decline. We investigate whether this reduction has coincided with a fall in benefits provided by brokers to institutional asset managers. We use trade packages from both active and passive equity funds from 1995 to 2001, and active equity funds from 2002 to 2010. We find that later period active funds recoup a combined 1.75 basis point benefit (from price impact cost recovery and short-term alpha) per basis point of brokerage cost. Later period active investors saw improved trade price impact and shorter-term alpha net benefits, relative to earlier period active investors. These results are robust after controlling for trade characteristics and cross-sectional variation over time. Our findings suggest brokers innovate to provide valuable services in the subsequent, lower brokerage environment.

Culture di democrazia partecipativa ed europeizzazione dal basso nei social forum italiani, britannici e tedeschi

Cultures of participatory democracy and from in the Italian, British and German Social Forums - To what extent can grassroots activists in different sectors of the global justice movements participate in transnational, Europe-wide social forum meetings held between larger protest events, transnational summits and everyday activism - not only dependent on structural, but also cultural patterns of communication and cooperation in movement groups? This question concerns students of European integration as well as thinkers of democracy beyond the nation state, and activists that seek to mobilize a critical discussion on the future of global and European politics. Social movement researchers and cultural sociologists have pointed to the practical challenges of participatory democracy in asymmetric networks composed of groups with pluralist cultural and material resources. Building on ethnographic data and interviews, this article looks at experiments in -deliberative talk-, or discursive democracy in national level social forum preparatory meetings in three different countries. The aim is to compare the challenges and opportunities of coalition building looking at organizational crisis and conflict in domestic social forum processes in Italy, Germany and the UK. This article shows that place-specific cultures of communication and cooperation in the national level social forum processes conditioned and restricted the quality of grassroots participation in the European assemblies and encounters of the ESF. Finally, the article shows that institutional brokerage helps facilitate transnational grassroots mobilization and a Europeanization from below in the case of the ESF process.

Asymmetric Effects of Sell-Side Analyst Optimism and Broker Market Share by Clientele

Using broker level data we demonstrate that relatively optimistic and relatively pessimistic analyst earnings forecasts both generate trade for their brokerage firms. This relationship is found to be asymmetric as the influence of relatively optimistic analyst forecasts on own broker market share is larger than the influence of relatively pessimistic analyst forecasts. Furthermore, upgrades and downgrades in recommendations also generate significantly higher broker market share, suggesting that sell-side institutions are rewarded for providing new information to the market. This study also provides evidence for the first time on how different broker clienteles react to earnings forecast and stock recommendations. Greater trade volume is found to be associated with optimistic earnings forecasts and stock recommendations are stronger for analysts affiliated with retail brokerage firms than those affiliated with institutional brokerage firms.

Brokerage Commissions and Institutional Trading Patterns

The institutional brokerage industry faces an ever-increasing pressure to lower trading costs, which has already driven down average commissions and shifted volume toward low-cost execution venues. However, traditional full-service brokers that bundle execution with services remain a force and their commissions are still considerably higher than the marginal cost of trade execution. We hypothesize that commissions constitute a convenient way of charging a prearranged fixed fee for long-term access to a broker's premium services. We derive testable predictions based on this hypothesis and test them on a large sample of institutional trades from 1999 to 2003. We find that institutions negotiate commissions infrequently, and thus commissions vary little with trade characteristics. Institutions also concentrate their order flow with a relatively small set of brokers, with smaller institutions concentrating their trading more than large institutions and paying higher per-share commissions. These results are stable over time, are consistent with our predictions, and cannot be explained by cost-minimization alone. Finally, we discuss the evolution of the institutional brokerage market within the proposed framework and make informal predictions about future developments in the industry. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Which Factors Influence Trading Costs in Global Equity Markets?

This article examines global trends in equity-related transaction costs and trading volume by identifying recent patterns in institutional brokerage commissions, indirect trading costs, and trading activity. The results indicate a steady decline in brokerage commissions around the world, but indirect trading costs appear to have reached a plateau. The fastest growth in trading volume can be found in the emerging markets of South America, but the United States leads the way in terms of the steepest reductions in transaction costs. The empirical evidence also shows there is a simultaneous relationship between global equity trading volume and transaction costs that is driven by trends in both U.S. and local equity markets. This suggests that global investors are likely becoming more cost-sensitive and increasingly open to directing orders to those international markets where transaction costs are lower.

Brokerage Commissions and Institutional Trading Patterns

The institutional brokerage industry faces ever increasing pressure to lower trading costs, which has already driven down average commissions and shifted volume towards low-cost execution venues. However, traditional full-service brokers that bundle execution with services remain a force and their commissions are still considerably higher than the marginal cost of trade execution. We hypothesize that commissions constitute a convenient way of charging a prearranged fixed fee for long-term access to a broker's premium services. We derive testable predictions based on this hypothesis and test them on a large sample of institutional orders from 1999-2003. We find that institutions negotiate commissions infrequently, and thus commissions vary little with order characteristics. Institutions also concentrate their order flow with a relatively small set of brokers, with smaller institutions concentrating their trading more than large institutions and paying higher per-share commissions. These results are stable, consistent with our predictions, and cannot be explained by cost-minimization alone. Finally we discuss the evolution of the institutional brokerage market within the proposed framework and make predictions about the future developments in the industry.

Institutional brokerage anti‐money laundering detection scenarios ‐ Filling the gaps

Certain institutional trading operations executives of major broker‐dealers currently are indicating that there is a paucity of guidance from regulators and others on the potential characteristics of anti‐money‐laundering activities in their specific business areas. Because of requirements to file suspicious activity reports with regulatory authorities where these enterprises suspect potential money‐laundering activities, these executives are trying to build and grow the best possible methods of detection to detect potential instances of money laundering, especially where they may have little information as to the identity of the parties who are originating transactions in their institutional contexts. Because of these issues, the existing securities industry AML guidance that is available must be analyzed carefully, keeping in mind the need to construct new scenarios addressing the specific circumstances of the institutional brokerage context.

Managing Institutional Brokerage Professionals

Sell-side investment professionals have an increasingly important role to play in this high-tech age of information overload. Managing these professionals is much more of an art than a science, but several basic principles apply—ranging from recruiting well, to giving full account responsibility, to having fun. This presentation comes from the Managing the Investment Professional conference held in Chicago, Illinois, on April 2, 1996.

The Changing Shape of Investment Research

> Higher position losses, together with lower institutional stock portfolio turnover, lower commission prices and higher total costs, have combined to make the institutional brokerage business unprofitable. Unless revenues go up soon, costs must come down. Cost reduction in research means reorienting research activity away from the institutional market toward other, more profitable markets. Four such markets-the retail brokerage business, the investment banking business, corporate consulting and the broker's own fund management businessare already being explored. To meet the needs of these markets, research practitioners will have to make some changes. Reorientation will probably mean less contact with institutional analysts, fewer in-depth published studies and fewer analysts following the big institutional stocks. Research for the retail brokerage business, for example, is recommendation-oriented, with less emphasis on underlying reasoning and analysis. The research analyst supporting the retail brokerage business will find himself making less use of his communications skills and laying greater stress on successful stock-picking-from a somewhat different universe of companies. Even if the securities industry goes to a dealer market i n a post-Ru le 390 envi ron ment, however, institutional research will not be abandoned. A broker will give research to those institutions that choose to use its dealer services; research and related services will become a way for brokers to attract an order flow to their dealer business. >

How Good is Institutional Brokerage Research?

How Good is Institutional Brokerage Research?

Negotiated Commissions and the Structure of the Institutional Brokerage Industry

(1976). Negotiated Commissions and the Structure of the Institutional Brokerage Industry. Financial Analysts Journal: Vol. 32, No. 5, pp. 25-26.

How Good is Institutional Brokerage Research?

(1972). How Good is Institutional Brokerage Research? Financial Analysts Journal: Vol. 28, No. 1, pp. 54-60.