Fireside Friday with… Jefferies’ Dean Gray

The TRADE sits down with Dean Gray, head of EMEA outsourced trading at Jefferies, to discuss the rise of outsourced trading, how the market is set to shift as more heads turn in the direction of the white space and what the outlook is for potential future consolidation in the market.

Just how far is the industry looking to take outsourced trading going forward? 

It has been well documented that the past few years have seen a significant shift in the mindset, especially of the larger funds, towards the adoption of outsourced trading. As larger funds utilise the service, other groups such as sovereign wealth and platform providers are becoming increasing involved. 

These groups have an inherent nature of complexity that require outsourced trading providers to heavily invest in human capital and technology to meet all of their requirements effectively.

What have been the biggest moves in the outsourced space over the last year?

The outsourced trading industry has grown to around 50 providers, and against this backdrop I anticipated that two trends would occur at the larger end of the market. Firstly, that growth would lead to new entrants, and secondly, there would be consolidation amongst providers.

This would result in polarisation, with a few key players and a larger number of smaller specialists leading the growth. We have started to see that. Further, as the industry has begun to mature, each offering is becoming more clearly defined. The reality is many are not prepared to make the significant investments required to maintain or grow their share of the market.

A recent industry study illustrates this, with the Jefferies desk the largest provider of Outsourced Trading by client usage, having shown phenomenal growth since launching in 2018. 

With the market’s larger players making real moves in the outsourced space, what does that mean for the future of trading strategies? 

From a technology standpoint, the ability to not only access but develop your own customisable trading software will continue to be important in order to deliver an enhanced quality of execution for the underlying client. As competition at the top of the industry has increased, I anticipated consolidation amongst the larger players and we have started to see that.

I now foresee the next phase will be towards the offering of a wider range of asset class coverage, such as fixed income.

From your perspective, what is the key thing those looking to outsource are considering? 

Many articles have reported that better execution and cost-effectiveness are the principal motivations behind outsourcing, but we have noted the ability to cover multiple regions and asset classes are just as important. With this in mind, Jefferies has heavily invested in its global platform, having experienced buy-side traders in key geographical regions as well as dedicated sales, onboarding, technology and operations teams.

In my opinion, the ability to also partner with a brand which is global is important, especially those offering services such as prime brokerage, capital intelligence and introduction.