Buy-side demands more timely execution consulting
Buy-side traders consider execution consulting
services to be a crucial element of broker service but currently find that
requests to brokers for bespoke analysis are far too slow.
The findings come as part of a report by
consultancy Aite Group in conjunction with analytics provider Streambase.
The study involved qualitative analysis of 15
leading brokers, and found that 87% of those questioned consider execution
consulting to be a key differentiator in the services offered to the buy-side.
Aite identifies key execution consulting services
as high-touch advisory services that help clients to understand market
conditions and optimise their electronic trading strategies accordingly, analysis
into the quality of trade execution, risk and transaction costs, and real-time
execution tool to track prevailing market conditions.
Around 79% of respondents believed active
alerting is the most important execution consulting tool, while over half
identified pre- and post-trade analysis, a single view of client data and
real-time transaction cost analysis as other important elements.
However, the majority of those questioned added
that their current service levels are unacceptable. Whereas most brokers
respond to their buy-side clients within five days, many expect near real-time
support and responses. The report also considers that the regulatory drive
greater transparency has imposed considerable requirements on brokers, also leading
to expectations of real time risk management, reporting and surveillance.
“The main challenge for tier one and tier two brokers is that the
decentralised trading infrastructure creates complexity and latency for firms
seeking to identify and address issues during the lifecycle of a trade,” said
Sang Lee, managing partner at Aite Group. “Many brokers have dozens of systems
connected to various liquidity venues, data sources and databases. The key to
building a scalable and sustainable execution consulting service is to effectively
integrate these systems and deliver customised and relevant information to
sales traders, quants, risk managers and analysts in real-time.”
“The fact that execution consulting services has now eclipsed the
importance of broker-supplied algorithms is remarkable,” added Mark Palmer, CEO
at StreamBase, “With automated trading levels at an all-time high,
broker-dealers now must differentiate themselves based on the real-time insight
they can provide buy-side clients.”