This is the first part in a three part series on Transition Management
Frankly, most people would have to say, “No.” Identifying a conflicted Market-on-Close (MOC) trade can be difficult, but we can show you how. It simply requires a fill-level execution file from your transition manager and some advanced intraday charting capabilities.
Tell-tale signs of a conflicted principal trade:
- Single stock identifiers: Fill-level prints that are larger than the market’s closing print
- For example, if your fund sold 120,000 shares of XYZ at the close, but the closing print in the market was only 80,000 shares, your trade was executed by a principal desk. Look for unusual price action prior to the close.
- Portfolio level indicators: Dramatic price disparity in the final hour of trading
- After charting the portfolio disparity between the target and legacy, look for an inflection point in the final hour. In the example below, the black line represents the implicit cost as measured by the difference between buys and sells. Note the inflection point at 15:40, 20 minutes before the close. This portfolio lost over 100 bps in the final 30 minutes.
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 proprietary 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 [email protected] and follow us on Twitter (@capisinc) and LinkedIn for more updates and insight from our team.