When it comes to navigating the landscape of broker selection and benchmarking, experts at TradeTech 2026 have emphasised that the key to success for both brokers and the buy-side lie with strong trusted relationships and client collaboration.
Data, as noted across a multitude of industry sectors, often forms the backbone when it comes to effective broker and algo selection. However, for the buy-side, being able to build trust through transparent relationships is frequently the clinch point for broker placement decisions.
Reflecting on his experience navigating this field, Mark Montgomery, chief commercial officer at xyt, commented: “A lot of what we do ties back to the partnership with clients around how we’re doing certain things within an algorithm, wheel or strategy. The more open we are with clients, the more likely we are to get a feedback loop of what is working well.
“Building that trust is so important because if you’ve got a good partnership with the buy-side, whether you’re in a hedge fund scenario or a long only provider, the conversation that can come from having a trusted relationship is very powerful.”
In a similar vein, although automation and technological advancements are quickly sweeping the industry, bringing many opportunities in different areas, for the panellists, the importance of ‘the human aspect’ among this cannot be under emphasised.
This was key for Mathias Eriksson, head of global equity execution at Andra AP-fonden (AP2), who said: “We shouldn’t underestimate the human part of the business. If you really trust the broker, then that broker should get placed within your strategy.
“There are a lot of soft skills behind it. The way you address any problem to any broker and the way they come back to you – such as how professional they are – it makes a big difference.”
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To highlight just how critical trust is when it comes to algo and broker selection, panellists used an example from the growing ETFs sector, specifically, that more active managers are beginning to move into the space, encouraging brokers to innovate execution methods for ETF markets.
Reflecting on how trust can set brokers apart in this space, Montgomery added: “The brokers who have a trusted relationship with the buy-side for their equity execution are suddenly seeing more ETF flow.
“They’re saying, for example, I could use an RFQ here – it’s a perfectly good way of getting my risk transferred. But some of the time I might want to work the order through an algo. Who do I go to? My trusted broker.”
Buy-side leading the way
As often seen, conversations also whittled back down to the buy-side, in particular, the influence they can have on broker selection and algo customisation.
Specifically, panellists emphasised how the buy-side can be the driving forces behind changes within the broker and algo landscape, and if they emphasise key changes, the industry will look to meet them – echoing the well-known ‘if you build it, they will come’.
Highlighting popular customisations, such as mid-point matching for reduced information leakage, Montgomery said: “The buy-side has an advantage because they can start a race for a certain piece of functionality and let all the brokers compete to deliver that. Ultimately, that’s in their best interests because it leads to innovation.”
Following on from this, discussions also turned to what specific customisations and priorities are the buy-side truly looking for.
Across this, points such as comparing brokers to measure performance and make comparisons, as well as keeping in consistent conversations and gathering large amounts of data were top priorities emphasised by the buy-side experts on the panel.
“We are in an increasingly automated world, and discussion with brokers is really important,” asserted Nicolas Weber, head of execution at Rothschild & Co.
“So, we are more automated but we also need to speak more and more with brokers about how the algo is working and about customisation. For example, if there is something new proposed to me and it looks like it’s working well, if you can have another broker to measure it, and compare that, then you are likely to find the best model for you.”
Similarly, governance, and maintaining clearly drawn rules was unanimously agreed on by the panel as an essential part of algo and broker selection for the buy-side.
For Eriksson, achieving the best outcomes within this landscape derive from a combination of good governance, and strong data.
He added: “Governance is pretty important because we have to have clear rules, a clear process and a lot of documentation. However, on the other hand we also need good data. So, we need to be able fragment and segment our flows and include some good governance to then implement on the data collected.”
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However, for Weber, there is a fine line between good governance, and overkill, and when ensuring there are clear boundaries for algo and broker selection, it is important that the industry leaves space for exploration and development.
Explaining this, he concluded: “Governance is really important as you said, but traders need to have room to find what’s next and navigate through new features.
“If your governance is too tight, I think it could potentially kill whatever it is you want to do next.”