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New York – In a June 11, 2007 Pensions and Investments issue some of the execution data and analysis caught our attention. The top line results, discussed in an article entitled "Familiar Names Lead Best-Execution List" indicates that Morgan Stanley, Rochdale, Goldman and Fidelity are at the top of the overall analysis of best execution.

In a section entitled TRADEWATCH data was presented which covered of about 7 million trades in the year ended December 31, 2006. Initially the analysis splits the trades into small trades (10,000 shares or less) and large trades (over 10,000 shares). Each of these is then further segmented into 1) full service brokers, 2) execution only brokers and 3) research/specialty brokers.

Because of Integrity's interest in research, the third category (Research/Specialty Brokers) is the most interesting and is the focus of this entry.

In the small trades area, the top ten firms were:

1.   Raymond James

2.   SunTrust Robinson Humphrey

3.   Abel/Noser

4.   Autranet

5.   Janney Montgomery Scott

6.   BMO Capital Markets

7.   Pershing

8.   Friedman, Billings, Ramsey

9.   Morgan Keegan

10.        Hilliard Lyons

For the large trades group, the winners on best-ex were:

1.   Rochdale

2.   Pershing

3.   AG Edwards

4.   SunTrust Robinson Humphrey

5.   Jefferies

6.   BMO Capital Markets

7.   Gerson Lehrman Group

8.   Wachovia

9.   Friedman, Billings, Ramsey

10.        Lynch, Jones & Ryan

Note: One interesting side note is that both AG Edwards and Wachovia – which bought AG Edwards in the spring of 2007—are in the top ten.

Calculation of best-execution is measured by the Plexus BrokerEDGE transaction database and compares execution to the Plexus Average Execution Gain/Loss benchmark.

From our point of view, a review of the above data begs the question "Is there any correlation between best-execution and best research?" Investars performance data can be used to assess the synthetic performance of a research company as if an investor had taken all of the recommendations of that company and acted on them.

There is not a perfect overlay of companies for which we have both execution data and the performance data, but we present below the rankings of the firms for which we do have overlapping information sets. In the second column we present the rank of the firms that appear in the best-ex Plexus list and in the second column we present the rank in the research performance database of Investars.

Small Trades Group

Large Trades Group

Depending on how one weights the importance of execution and/or research in the analysis the top firms in research and execution may vary. We base our analysis solely on inspection. By this rough gauge, it would seem that the top firms as in the Research/Specialty Group are Hilliard Lyons or Raymond James for the small trades group, Rochdale or Jefferies for the large trades group.

Note: Integrity is currently in the process of authoring a report on the small cap research company space.