Instinet said it is giving its institutional customers the ability to electronically cast votes on which brokers provide the best research on possible investments.
The electronic trading pioneer and provider of agency-only brokerage services said it added broker review and voting functions to its commission management software, known as Plazma.
The new capabilities let administrators manage the entire process by which their firms vote to apportion dollars to be paid for research, access to management and other related services.
Firms typically vote each quarter, apportioning 100 votes to head traders, portfolio managers and analysts. The percentages of votes cast determine which brokerages get which slice of available dollars for such payments.
The added functions allow institutions to view their historical allocations, both by number of votes and total commission; input relevant information about services rendered by each broker; and rate a provider’s service. The ratings can be compared.
Firms already providing automated broker-voting programs include ConvergEx, Markit Group, State Street, UBS and Advent Software, according to Tabb Group.
“In order to successfully vote on services more buy-side firms are moving toward adopting a formal method for tracking which services were consumed by whom,” said analyst Cheyenne Morgan, author of a Tabb report issued in July entitled “The Broker Vote: Complexities of the Buy Side Ballot.”
“From meetings to e-mails to ad-hoc phone calls, each touch point will be captured internally, so that a more complete picture of a broker’s value can be easily accessed during the vote.”
The two benefits to using an automated system: a reduction in operational risk and regulatory compliance.
“A increasing number of firms are realizing there are some pretty significant inefficiencies associated with a manual Excel process,” wrote Morgan. “As the buy side attempts to be more adamant about documenting every meeting, e-mail, phone call and vote and distributing results to brokers, Excel begins to make less and less sense.’
Users of the Plazma commission management suite last year processed more than 30,000 invoices globally worth more than $275 million.
“We view this added functionality as a natural extension of Plazma’s capabilities, and believe that clients will find real value in the integration of a broker voting mechanism within the system they use to manage their commission spend,” said Jonathan Kellner, president of the Americas at Instinet.
-- This article first appeared on Securities Technology Monitor.