https://tabbforum.com/opinions/sec-extends-no-action-relief-on-mifid-ii-greater-flexibility-in-acquiring-research-encourages-csas/ 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."
https://tabbforum.com/opinions/meet-your-market-maker-europes-elp-sis-gain-ground/ 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.
https://tabbforum.com/opinions/buy-side-trend-watch-harnessing-alpha-with-innovation/ Wayne Curry - Bespoke dashboards that mingle internal and financial data, visualize ideas, and share the results across the firm can also enhance the scalability and productivity of the idea generation process. This strategy boosts capabilities and delivers transparency more efficiently.
https://tabbforum.com/opinions/unintended-consequences-shrinking-sell-side-research/ 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.
https://tabbforum.com/opinions/why-you-are-probably-using-the-wrong-technology-in-capital-markets/ 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.
https://tabbforum.com/opinions/trading-favors-the-technologist-the-buy-side-technology-arms-race/ Campbell Peters - While buy-side firms have built out their technology and analytics teams considerably, most firms still outsource execution algos from their brokers. This is especially true for fundamental firms, as quantitative firms are more likely to develop some of their algos in-house. These quant firms have been the most willing to adopt emerging technologies, such as machine learning and AI, since they have the resources to develop and test the functionality in-house if needed.
https://tabbforum.com/opinions/buy-side-turning-to-technology-to-meet-todays-challenges/ Monica Summerville - The practical reality of this means robotic process automation (RPA), as opposed to AI – e.g., machine learning (ML) and Natural Language Processing (NLP) techniques – are more likely to be implemented to start.
https://tabbforum.com/opinions/unbundling-is-upending-asset-management-as-we-know-it/ Larry Tabb - Increasingly, the large buy-side firms are embracing unbundling, as it enables them to better manage their business. It provides greater clarity around what research managers need, the cost of obtaining that information, and the service models it entails. It also allows buy-side traders to focus their attention on sending their orders to the most effective execution desks, instead of allocating those trades to research brokers based on their investment ideas, even if their trading desks are not truly effective. Also See: Industry at War with Itself, and Unbundling’s Impact on the Buy Side-Sell Side Relationship
https://tabbforum.com/opinions/the-importance-of-research-and-how-you-pay-for-it/ 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.
https://tabbforum.com/opinions/heres-how-outsourced-and-supplemental-trading-solutions-reduce-operational-risk-and-cost/ 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.