Two big investment banks are refusing to accept orders routed from fund managers in London using ITG’s Triton execution management system because of a row over interpretations of the Financial Services Authority’s rules against soft commissions.
The two Canary Wharf investment banks, both leaders in electronic trading, allege that the system of charges, which requires them to pay a percentage of the value of trades executed, effectively subsidizes the cost of Triton to ITG’s clients. They allege that this would be in breach of the FSA’s rules against the use of soft commissions.
ITG has rubbished the claims and dismissed them as a negotiating tactic by rivals unhappy with the success of its front-end execution management system, which has been adopted by some of the world’s largest fund managers. Triton is now used as the front-end trading application of 25 fund managers with collective assets under management of $6.5 trillion. The average assets under management of Triton users is $400 billion.
At the heart of the dispute are the charges that brokers receiving orders from clients are required to pay. These are levied for the use of ITG’s communications network, ITG Net, which is a separate company from its execution management system, with a separate P&L and management team.