Despite electronic execution’s continued dissemination, buy-side traders are still prioritising strong relationships and the ‘human touch’ when selecting brokers for high-touch trades, a Coalition Greenwich report has revealed.
Specifically, the study found that more than two-thirds (68%) of traders interviewed highlighted customer service and desk coverage as the most important factors when it comes to selecting a broker.
“Even as electronic execution becomes the norm, the human touch has emerged as the ultimate differentiator,” said Jesse Forster, author of the report.
“It’s no longer just about speed and efficiency – it’s about having a trusted counterparty offering tailored support, access to natural liquidity and a steady supply of market intelligence throughout the trading day.”
Block trading and sourcing natural institutional liquidity were also key priorities, with 60% of traders saying this was the most important attribute, followed by 55% which confirmed they prioritise high-quality sales coverage.
Similar preferences are also seen when it comes to the buy-side’s choice of low-touch trading solutions, with performance and service taking the precedent.
Challenges facing buy-siders looking for brokers
Elsewhere, nearly half (46%) of traders pointed to the importance of execution quality and trade performance, while more than 40% highlighted the fundamental role of customer service, specifically algo customisation and execution consulting and strategy advice.
Coalition’s findings indicated that a significant portion of the buy-side seek brokers who can provide expertise on how to optimise trade execution, while also being flexible on trading strategy, with 44% of traders saying that they have difficulties getting proper coverage from their brokers.
Managing commissions and dealing with operational, mid- and back-office and settlement issues were also flagged as common problems for the buy-side in equity trading, and the report highlighted that industry developments such as the US’ shift to T+1 has underlined the key role that operational efficiency plays for traders.
Demonstrably, there is both a want and a need across the industry for brokers to build solid relationships with the buy-side and deliver these key factors – in order to both gain loyalty, and also a competitive edge against other brokers in the industry.
Coalition Greenwich’s “US equity broker selection: It’s the service, stupid” report surveyed 40 buy-side equity traders in North America from July to September 2024.