It’s no secret that for trade execution, the baseline expectations for a broker’s offering have increased sharply over the past few years. The markets are moving faster, technology is even more critical and activity is through the roof – particularly in options, where volumes in 2021 were up 32.2% versus 2020, which itself was a 52.4% increase over 2019, according to OCC. At the same time, advancements in Trade Cost Analytics (TCA) have made investors far more attuned to execution quality and the many factors that can influence it. All this has created an environment in which selecting the right executing broker is more important than ever.

While you might think of us as a clearing broker, RQD is an industry leader in execution as well. After spinning out of an established options market maker, we now serve a wide array of broker-dealer clients trading equities or options, helping them with everything from direct market access (DMA) and algos to risk checks and regulatory reporting.

Our senior team brings decades of experience, witnessing first-hand how the right combination of technology, expertise, flexibility and communication can produce powerful execution results. There are many high-quality offerings available to broker-dealer clients today, but in our experience, selecting a truly differentiated execution services partner requires scrutiny into these four elements. 

Customization

Market fragmentation has become a hot topic in recent years, and with good reason. But despite the increasing sophistication of market participants due to the proliferation of execution venues in both equities and options, most executing brokers offer little more than basic DMA and a small handful of static algorithms, most of which are relatively inflexible, especially at the user level.

To thrive in today’s markets, a higher level of configurability is needed – and our modular approach to execution technology delivers just that. We offer a growing list (40 today and counting) of highly customizable algorithms, and we’re regularly building bespoke strategies for our clients as well. Our smart order router can combine fee schedules from multiple routing destinations and manage them through a single FIX hub, with clients gaining the ability to make tweaks and adapt their strategies on an ongoing basis. That means that when traders want to execute, they can prioritize one type of venue over another, time-sync their execution or expose as much or as little to the market as they wish.  

This ability to trade in a targeted, customizable manner, combined with the right technology and expertise, provides our clients with maximum control.

Transparency

Truly optimized execution requires intelligence that goes beyond simple disclosures of routing decisions. By giving market participants unprecedented visibility into venues’ fee schedules and tiered pricing arrangements, we inject maximum clarity into the execution process.

These are touchy subjects in our industry – everyone knows their executing broker is profiting from their order flow, but when it comes to the ongoing relationship with their clients, there’s little to no discussion of the precise economics. It’s understandable, but in a world where fees and pricing tiers can – for better or worse – serve as flashpoints in debates over our market structure and whom it serves, it’s important to operate with full transparency.

When it comes to these issues, we take a collaborative, consultative posture, helping our clients understand the implications of fees and rebates for any given order. We make them true partners in the decision-making process around routing by keeping on top of fee schedule changes and determining together exactly how those should impact the routing table. We’ll work with you to develop a highly customized fee schedules tailored to an account’s trading strategy. .

Because fee filings and routing economics contain so many intricacies, market participants often don’t realize just how much their executing broker is keeping them in the dark. We believe being forthright with our clients delivers better results and forges stronger relationships. In other words, it’s simply good business.

Expertise

Our ability to deliver scalable, customizable functionality and essential information is a result of the knowledge and expertise of our team – both as technologists and trade execution practitioners.

Our modular approach to development unlocks a wide range of flexibility benefits for clients. In addition to being easily configurable, our algos offer a high level of integrability with trading platforms and other systems, for both our clients and their customers, as well as the ability to be white labeled for any purpose. Our technologists frequently help clients refine algo logic, optimize integrations with additional parts of their trading stack and solve other tough challenges. And the fact that our solution is built in-house means we fully control our own code base, allowing us to act quickly.

Beyond our veteran technology team, our client-facing organization also includes experienced traders, clearing executives, securities lawyers and more. We bring a deep understanding of execution venues – including the order types and fee structures that differentiate one from another – and how the ecosystem impacts your ability to deliver best execution to your end clients. Because we’ve sat in your seat, we know exactly what our broker-dealer clients are looking for – and thanks to our collective knowledge, we are uniquely well-positioned to provide it.

Totality

While customization, transparency and expertise are key qualities, they are not enough on their own. Executing brokers can deliver value in a wide variety of ways, and we seek to incorporate as many as possible into our offering, making it a truly comprehensive execution solution.

For example, we offer ultra-low-latency market access, built out of our market-making stack and adapted for the unique needs of our clients. We also help with phases of the trade lifecycle beyond execution, from post-trade allocation to compliance and reporting. And we offer all this at a lower cost than comparable providers, protecting our clients’ bottom line.

One more factor is our status as a market leader in the correspondent clearing space. While it’s not necessary to keep your clearing and execution under one roof, this approach can increase efficiency while providing access to an array of additional differentiated services, contributing to the overall offering.

Putting it All Together

It’s hard to achieve success in today’s markets – and even harder when you’re stuck with cookie-cutter algos and limited visibility into the totality of your costs. We hope this article has given you a better sense of how customization, transparency, expertise can enable advanced execution – and why RQD has all the necessary factors in place to make them a reality.

As we continue to spread the word about our execution services, our goal is to help the industry embrace these enhanced capabilities and work with us to approach the markets with their best foot forward. Interested in learning more? Don’t hesitate to reach out to [email protected].