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Matt Levine, Bloomberg, Don’t Sleep on Your Trades With ConvergEx, here. Doesn’t seem all that hard to write code to check the execution record against the order book  at the various exchanges over the past day, or in general historically. Put it up as a website service and let client spot check their executions.  Its like the reverse of Almgren’s Quantitative Broker’s execution business in fixed income, maybe  they could host it.  Maybe the clients would simply feel like it is too much work to even spot check the executions.

The basic deal was that you hired ConvergEx to do some pretty boring but big equity trades,and ConvergEx would do your trades for you on a purely agency basis and charge you a fixed stated commission. So you’d be like, “buy a million shares of Facebook,” and ConvergEx would go buy a million shares of Facebook for your account and say, “okay we filled you at $55.05” or whatever and then charge you a penny a share for their trouble.

But in fact what would happen is that ConvergEx would secretly use a Bermuda affiliate broker-dealer (ConvergEx Global Markets Limited, or CGM), which would buy the shares at, say, $55.02, and then sell them on to the client-facing ConvergEx entity at $55.05, and ConvergEx would go to the client and say “okay we filled you at $55.05, so pay us $55.06 with the commission, thanks.” ConvergEx called the extra three cents “trading profits,” which is a little euphemistic,or “TP,” which is not. “It was not uncommon for the amount of TP to be several times the amount of commission that the customer had paid,” says the SEC.


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