Tags: RBC | bank | high | frequency

Royal Bank of Canada Gains Customers by Shunning High-Frequency Trading

Friday, 28 Jun 2013 07:51 AM

By Dan Weil

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Many top Wall Street firms have thrived by using high-frequency and dark-pool trading. But Royal Bank of Canada (RBC) has built its customer bank by shunning those practices, The New York Times reports.

On dark-pool markets, banks execute customer orders through trades with other financial firms outside of public markets.

RBC avoids high-frequency trading with technology on its New York trading desk that slows down customer orders.

Editor’s Note:
Put the World’s Top Financial Minds to Work for You


The philosophy appears to be working. RBC advanced to ninth place among financial institutions in the amount of American stocks brokered last year, up from 18th in 2010, according to brokerage/research firm Abel/Noser, The Times reports.

And a recent study by the Tabb Group shows that RBC has particularly attracted sophisticated mutual funds and investors.

Bank customers are often victims of conflict of interest, as banks may have an incentive to trade on exchanges that provide them rebates, or in their own dark pools, rather than where they can do best for their customers, critics tell The Times.

As for RBC, "they really go out of their way to try to find ways to support our business — sometimes actually to their own detriment," Robert McGrath, head of trading at Schroders, tells the paper.

"Our philosophy is, and we sit around here all the time saying it: Doing the right thing is not always the most profitable thing," Robert Grubert, head of trading at RBC, tells The Times. "As business people that's not great, but it's an investment in our client and the long term."

Shah Gilani, event trading specialist for Money Map Press, expresses skepticism about dark pools on MoneyMorning.com.

"Are dark pool operators playing their customers by manipulating prices at public exchanges to influence trading orders and execution prices in their dark pools?" he writes. "The answer is, of course, 'yes.'"

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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