FAQ
Harness the Power™

Frequently Asked Questions (FAQS)

What are current total and average brokerage cost for equity trades in the U.S.?

A recent Morningstar study concluded that the average U.S. equity fund pays approximately 0.30% of assets or 30 basis points (bps) per year in brokerage commissions.1 Morningstar further concluded: “This is roughly the equivalent of 30% of the average no-load large-cap fund’s expense ratio. Thus, brokerage commissions can take what looks to be 0.90% paid in expenses each year up to 1.20%.” Morningstar went further to explain “much more startling are the huge fees paid by some individual funds that in some cases approach or exceed the entire expense ratios of many core funds.” Indeed, research indicates that the average “all-in” commission rate paid by U.S. institutions still remains close to 3.0 cents per share. According to a study by Greenwich Associates, the average “all-in” equity commission in the U.S. was 2.90 cents per share in 2009 and 2.78 cents per share in 2010 (a year in which total commission paid dropped 13% due to lower trading volumes)2.

How does my organization benefit from a commission savings program?

To address high commission rates, many institutions have turned to commission savings programs. These savings are usually directly additive to performance or are used to offset certain operating expenses of an account (an indirect addition to performance). Current savings programs, however, were designed before recent advances in electronic trading and fail to incorporate the latest technological innovations. The result is that most commission savings efforts are able to achieve participation rates of only 20% to 25% of an account’s orders. Thus, current savings program fail to achieve their full potential in generating the maximum possible commission savings.

iPerX employs multi-patented technology to address the most significant shortcoming in commission savings programs — the low participation rates achieved by most programs. iPerX can achieve participation rates of up to 75% of orders, which is triple the current 25% industry norm.

How does iPerX generate much greater savings than other savings programs?

iPerX achieves these high participation rates, and commensurately higher commission savings, by providing a patented trading algorithm to money managers that, through a single screen, enables the virtual automation of a fund or plan’s savings goals. The iPerX algorithm categorizes orders, using a real-time rules-based process, as “high touch” or “low touch” based on their potential market impact. The low-touch orders, typically up to 75% of an account’s order flow, are auto-routed to a fund or plan’s designated low-cost agency brokers to execute at very low commissions and thereby maximize commission savings. Meanwhile, the money manager’s trading desk is able to “work” the high-touch orders to provide true value-added service on orders with significant expected market impact. (UAT holds United States Patents 7,685,057; 7,809,632; 7,831,503; 7,856,396 with additional patents pending and patent filings in 38 countries.)

What additional benefits does iPerX provide that current savings programs do not?

As an additional benefit, iPerX’s sophisticated technology provides, for the first time, real-time transparency and reporting across holdings, activity, commission costs and savings to sub-advised and externally managed accounts. Thus, with a few keystrokes, one can look at real-time holdings, activity, and brokerage costs across a fund or several funds, a money manager or several money managers, a model or the entire model program, a trust or several trusts or which accounts holds a certain position. Also, if desired, iPerX can provide users with a low cost, real-time pre- and post trade compliance review process over their sub-adviser trading activity.

How does iPerX impact a money manager’s trading desk?

iPerX increases the efficiency of a money manager’s trading desk. The money managers retain complete control over all order management and trading as well as the iPerX algorithm’s “high touch” vs. “low touch” rules for determining market impact. iPerX also enables automated order execution of “low touch” orders, thereby eliminating any manual involvement by the money manager’s trading desk in the execution of savings orders. At a time when many money managers’ trading desks are facing staff reductions, iPerX’s automation is a valuable asset.

How does the iPerX algorithm provide Best Execution?

iPerX carefully evaluates each order individually in real-time and selects only those “low touch” orders that fit the parameters for participation in a commission savings program. These small orders are protected by SEC Regulation NMS (National Market System) which went into effect in 2007. Reg NMS was implemented to protect the small investors and requires that every trading venue (exchanges, ECNs and market makers) provide the best available price for an order or forward the order to the venue offering the best price. For example, the NYSE must forward an order to the Philadelphia Stock Exchange if the Philadelphia’s price is more favorable to the investor. Thus, for “low touch” orders, it is illegal for a trading venue to execute an order at a less favorable price than the best available price (which represents Best Execution). The SEC monitors execution quality by requiring all execution venues to file monthly Rule 605 reports, which details the execution quality for that venue. The result of SEC Rule NMS is that “low touch” orders must always receive “best execution” and that the only variable is whether the order pays higher or lower commissions.

Why is iPerX the only savings product on the market that provides money mangers with an algorithm that automates the savings trading process?

UAT, Inc. has developed valuable intellectual property pertaining to the method and technology utilized by iPerX. At present, UAT, Inc. holds four United States patents (with a fifth patent to be awarded in the 1st Quarter 2010) with additional patent applications pending. UAT, Inc. also has patent s filed in 38 countries reflecting the true global nature of the commission savings business.