Douglas Christensen – Transparency has led to cost pressures and a reduction in research spending, which has had the unintended consequence of brokers and banks scaling back on the cost of coverage and ultimately has led to diminished output of published research.
Larry Tabb – As a result, brokers are re-investing in their infrastructure and trying to leverage new technologies and data science to make their trading algorithms better, more efficient and more effective.
Steve Grob – Some firms have already seen the writing on the wall. Hg’s Director of research, David Toms, points out that Goldman Sachs has increased its spend on technology by 48% while simultaneously reducing staff expenditure by 13% over the past 5 years.
CAT REPORTING TIMELINES
Last Updated: September 10, 2019
|2a Equities||Large Industry Members and Small Industry Members that are OATS Reporters||Test Environment opens for file submission and data integrity validations||December 16, 2019|
Christopher Tiscornia – Westminster Research Associates, which is owned by Cowen Inc., has always been a strong proponent of allowing the use of client commissions to pay for research, particularly through commission sharing arrangements (CSAs). In the simplest form, trades are executed with a broker-dealer, generating commission credits that are housed in a CSA account with a broker-dealer such as Westminster, a pioneer in the business. These credits can then be used to acquire research from a variety of sources, including independent research boutiques as well as the research departments of larger investment banks in accordance with Section 28(e) of the Securities Exchange Act of 1934. As will be discussed here, we believe it is important that managers continue to have the flexibility to use commissions to acquire research.
Daniel Dispigna – Amid these challenges, one of the standout pain points is the sheer amount of work involved in running operations on the buy side, particularly as it relates to managing relationships with brokers. Liquidity fragmentation means it is now essential for firms to have relationships with a wide variety of brokers globally in order to diversify into new markets, instruments and regions, while also making it possible to participate in hard-to-trade names. But addressing one issue sometimes creates another; building and maintaining lengthy broker lists creates work of its own, from trade settlement to the complexities involved with managing such a wide network of counterparties. And if investors opt to keep their broker lists short, they are effectively limiting their access to invaluable sources of information and liquidity.