Introducing BestEx Research

I’m very excited to announce the launch of my firm, BestEx Research, a provider of high-performance, end-to-end algorithmic trading solutions. We seek to significantly reduce the largest element of performance drag for active managers--implicit costs. Depending on the underlying strategy, a portfolio’s implicit costs can range from 1% a year (in a large cap low-turnover portfolio, for example) to 4-6% (in a CTA or global macro portfolio), severely reducing returns.

Implicit costs are higher than they need to be for lots of reasons, the biggest being a lack of innovation in execution algorithms from large banks and brokers. Beyond large cap equities, most algorithms leave a lot of opportunity for savings. For futures and FX, most providers repurpose equity algorithms without addressing their unique market structure, resulting in high slippage. For FX, fragmented liquidity across banks rather than aggregated in a central limit order book makes conflicts of interest an even bigger issue than in equities. The tech from big brokers has aged, with hundreds of legacy configurations and layers of technology built on top of each other.

Beyond innovation, execution algorithms suffer a lack of independence. Often asset managers trade with several brokers and banks for a variety of reasons including research, access, leverage, and liquidity. This implicit or explicit bundling of execution with other services reduces customers’ ability to choose the best performing algorithms. And this perpetuates the lack of innovation.

There is also a lack of meaningful transaction cost analysis; something that isn’t measured properly can’t be managed properly. Most broker algorithms are opaque, providing little data to analyze, and TCA vendors are mostly building tools to address regulatory needs rather than improve execution.

These are the issues we’re solving at BestEx Research, with unparalleled sophistication in our execution algorithms for FX, futures, and equities. We’ve built our entire trading system from scratch using newer, faster technologies and a multi-asset system architecture. The impetus behind our choice to build in-house technology was the integration of a backtesting framework that simulates performance against months of tick data before taking changes live. Every detail of our high-performance execution algorithms relies on a systematic framework based on my 20 years of experience trading and studying the nuances in market structure of each asset class.

Our solution is broker-dealer-neutral, meaning our equity and futures clients can choose the brokers they want to trade with, and we use the brokers’ DMA (direct market access) to access the market. Similarly, our FX clients can choose the dealers from whom they want to get liquidity.

With our unique approach, clients have access to not only every parent order they submit but also child orders and cancellations tagged with the rationale behind that decision, regardless of executing broker. Over time, this data can become a powerful asset to guide customizations. Our web-based dashboard provides complete transparency in real time, regardless of asset class.

Our goal is not to be an intermediary, but rather an extension to our client’s trading desk, and help implement the most efficient executions possible. Our unmatched TCA platform allows us to analyze every decision made by the algorithms, and our consulting and insights for further improvement come from deep analysis of the results.  

We’ve been live for several months prior to this official launch, and the reception from asset managers has been tremendously positive. Our first client was one of the most performance-sensitive firms on the street, who decided to use our equity algorithms across the globe to replace their current stack. Since then, others have joined, and Abel Noser, a large agency broker, recently started offering our algorithms to all of their customers.  

For our customers, the choice is clear. One option contains a variety of mediocre, opaque algorithms provided by conflicted vendors. The other is BestEx Research, with high-performance execution algorithms offering incredible transparency, integrated TCA, consulting, and no leakage of parent order information to broker-dealers--all while executing with the brokers and dealers of their choice.

The problem of high implicit cost is very real, and even a 25% cost reduction can completely differentiate a manager from their competitors. Our systematic, independent approach is helping our clients get that edge, and we hope you’ll join us.

Warm regards,

Hitesh Mittal

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Read the annoucement on LinkedIn

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