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11.27.2020 9 new Morning Note posts under Morning Note (9)

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"Can You Identify a Conflicted Crossing Trade?"

posted by CAPIS on 09/30/2020 at 10:30 am

by CAPIS

09/30/2020 at 10:30 am

This is the second part in a three part series on Transition Management

 

Without intra-day trading transparency, it would be impossible to see a conflicted crossing trade.  However, when you combine intra-day volume with exposure imbalances, conflicted crosses jump off the page.

In the example below, four conflicted crosses can easily be seen; all sells represented by the unusually high pink bars.  Based on the consistent level of buys and sells (red and blue bars), the transition manager apparently put this event on a basic time-slicer (this should be your first clue that execution and risk management are not high on their list of priorities).

How do we know these crosses were conflicted?  Look at the sector exposure chart for this event.  The dotted line represents market exposure.  With each cross, the portfolio became less exposed to the market relative to its objective.  Bottom line, each cross provided more revenue to the transition manager while increasing performance risk for the client.  The conflict is clear.

 

The CAPIS Difference:

Since 1998, CAPIS has been a trusted independent provider for transition management services; executing every position as if it were our own.  As a true independent agency broker, CAPIS does not have the conflicts associated with internal risk books, internal investment management or affiliated execution venues.  Our focus is simple … provide clients with superior execution, complete transparency, and personal service.

To learn more about CAPIS and how we can be a valuable resource, please contact David Choate at dchoate@capis.com and follow us on social media for regular updates and insights from our team.

Follow us on Twitter (@capisinc) and LinkedIn for more updates and insight from our team.

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