Michael Mollemans – “Further, the typical workflow, duties and responsibilities of buy-side traders are quite different from sell-side traders. Outsourced traders are mandated to be an extension of the buy-side firm and so buy-side trading experience can be very helpful. In fact, buy-side firms often insist that their outsourced trader have buy-side experience so that they understand the unique responsibilities of the role, and this is among the service offerings most valued by managers (see Exhibits 1 and 2, below). Outsourced trading firms understand this point and often hire only traders with buy-side experience.”
Christopher Tiscornia – “As we move forward, U.S. asset managers need to implement best practices to promote greater transparency and support the spirit of MiFID II and its unbundling requirements. These practices include:
- Having a thorough, defensible process around research valuation and consumption.
- Unbundling the trade execution decision from the research decision via the use of CSAs.
- Providing transparent reporting of research funding, consumption, and value to asset owners and regulators.
- Ensuring that the interests of managers and asset owners are aligned. Managers need to articulate how their research spending patterns, approaches to investing, and enhanced reporting processes are consistent with asset owners’ expectations.”
Paul Rowady – “Ok. So, in order to avoid one of those vein-popping rants, I just want to remind that there is no such thing as a free lunch, that the retail brokerages are not charities, and that they will absolutely make up lost commission revenues in other ways, usually obfuscated way down in the guts of their workflow process where few people notice.”
Tim Cave – As Exhibit 4, below, shows, the future prospects for the ELP SI market are affected by a range of regulatory, operational and competitive forces. Taking all these factors into account, we think there is no reason why this market won’t continue to grow over the next 12 to 28 months. That said, the continued collection of data on ELP SI execution quality by brokers is likely to reinforce the consolidation of activity into the best-performing SIs, making it difficult for others to survive.
Alex Rabaev – Overall, in-house built solutions are not replaceable, but it may be more practical to consider outside solutions. The decision is never one dimensional and never in the moment, as it will transcend scope and time. Your decision should balance practical short-term considerations and long-term strategy/vision.
Don Ross – Our markets, you see, were not built for institutions. They were built for the little guys – guys with little orders. We have complex and costly market-linkage and order-handling rules to protect their orders.
John Jannes – Here are three key takeaways that broker-dealers need to think about.
1. Now is the time to have conversations with your downstream brokers and venues.
2. Start gathering the required look-through data.
3. Understand the two options to obtain and process downstream execution data.
Shanny Basar – The study said firms were using machine learning in cases ranging from equity trading to optimize order-routing and deal execution to anti-money laundering where the technology is used to analyse millions of documents for ‘know-your-customer’ checks. Insurance and banking had the most live cases in the sample with the median bank having 5.5 machine learning applications.
Greenwich Associates report – With 44% already using AI and another 17% reporting plans to implement it in trading in the next 12 to 24 months, a solid majority of market participants — including buy-side institutions, sell-side firms, exchanges, and others — soon will be using AI in the securities trading process.