As a companion to Greenwich Associates' qualitative survey, investment banks also participate in a quantitative survey created by McLagan Partners (www.mclagan.com) from Stamford. Connecticut. Unlike the Greenwich Associates survey, trading commission numbers are self-reported by the broker/dealer community. The assumption for this survey is that each firm will report honestly. It is in their self-interest to have accurate information even if the news is unpleasant.
The McLagan reports are published every quarter and sell side firms value the regular and somewhat immediate feedback. Greenwich and Institutional Investor ratings occur once a year. Because of the quantitative nature of McLagan, they are able to cast a wider universe of buy side firms. Instead of sending questionnaires to thousands of buy side firms, they are sent numbers by the sell side - a more limited set. One thing in common between Greenwich and McLagan is that their results are to be kept private. They are performance measurement services that allow broker/dealers to improve their client service.
The process begins at the end of each quarter. A list of current buy side firms are sent to the sell side. This list includes any changes such as re-organizations, mergers or spin-offs since the prior quarter. McLagan asks if there are any new firms that should be added to increase their coverage universe.
The firm respects the privacy wishes of buy side firms by allowing them to opt out of the survey. This request is usually in response to the following comment by the broker/dealer. "Last quarter, we were ranked 3rd in your broker survey and we know that there were 5 firms with more commissions than us. How can we get this discrepancy resolved in the next quarter?" To avoid this conversation, the buy side will ask McLagan to suppress their records in the survey. If too many firms are suppressed, the survey is devalued.
Each sell side firm submits their quarterly commission numbers about 3-4 weeks after the end of the quarter. McLagan compiles the numbers and publishes the results 1 month later. The reports are run broken down by region (Americas, Europe and Asia) and by product. Products are split into country and type of security. Each sell side firm is ranked in absolute numbers and given a rank out of the total number of broker/dealers that trade with the buy side firm. Depending on where the firm is ranked, commission numbers are given at different benchmarks such as number 15, 10, 5 and average of the top 3.
These are the basics of the survey. I will give more details in the next post.
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