Trading Technology

10:37 AM
Melanie Rodier
Melanie Rodier
Commentary
Connect Directly
Facebook
Google+
LinkedIn
Twitter
RSS
E-Mail
50%
50%

Buy-Side Really Wants Human Beings, Not Just Algos - Aite Survey

A new study by Aite Group found that buy-side firms are not happy with the current level of service provided by their broker-dealers. Buy-side firms expect their broker-dealers to provide value-added advisory services on trading analysis and timely support for electronic executions.

A new survey conducted by Aite Group found that the buy-side is pining not just for ever faster computers and faultless algos, but for a real human being who can help clients understand the market and use algorithmic tools effectively.

According to the report, 87 % of broker-dealers believe “execution consulting services” (ECS) have become more important to them as a differentiator than core liquidity management services and algorithmic trading.

The study defined “The Next Generation of Execution Consulting Services” as a new service level that buy-side firms are increasingly demanding from broker-dealers. The traditional interface between broker-dealers and buy-side clients has been a reactive customer support function. But with the rapid adoption of electronic trading and increased market uncertainty, modern “execution consultants” are part traders, part quants, part IT, and part relationship managers, the report notes. Execution consulting services teams must provide greater value and insights for buy-side clients, Aite suggests.

Sang Lee, managing partner at Aite Group notes that the main challenge for tier 1 and tier 2 brokers is that the decentralized trading infrastructure creates complexity and latency for firms seeking to identify and address issues during the lifecycle of a trade.

“Many brokers have dozens of systems connected to various liquidity venues, data sources and databases. The key to building a scalable and sustainable execution consulting service is to effectively integrate these systems and deliver customized and relevant information to sales traders, quants, risk managers and analysts in real-time,” he stated in a release.

The report found that the majority of respondents report that their current service levels are unacceptable. Many have a 3-5 day turnaround time to buy-side inquiries, while the majority of respondents expect near real-time supports and responses.

Meanwhile, Aite noted that 79% of respondents believe that active alerting is the most important service of ECS functionality. More than half the respondents identified the other key elements of ECS as pre-trade and post-trade analysis, a single view of client data, and real-time trade analysis.

“The fact that ECS has now eclipsed the importance of broker-supplied algorithms is remarkable,” said Mark Palmer, CEO at StreamBase. “With automated trading levels at an all-time high, brokers-dealers now must differentiate themselves based on the ability of real-time insight they can provide buy-side clients. This is a new way of thinking for many firms, and ECS groups will demand a new kind of real-time analytics platform as a result.”

Aite Group’s study was conducted during March and April 2012 and involved a qualitative analysis of 15 leading broker-dealers.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio
Comment  | 
Print  | 
More Insights
More Commentary
Bitcoin: 4 Factors Holding the Banks at Bay
For a number of reasons, major banks haven't seized the opportunity to get involved with bitcoin. Banks like to participate in size, compliance has restrictions, and bosses don't understand it. But these hurdles will be overcome in 2015.
5 Tips On How To Prepare For A Data Breach
If you are a financial institution your cyber security defenses will be breached -- again and again. Here are five tips to respond quickly and minimize damage.
Wall Street CIOs Have a Vendor Management Problem
If Wall Street CIOs want to stay ahead of competition and ensure high-speed trading software doesn't start the next flash crash, they need better insight into vendor delivered software.
Technology Innovation Returns to Financial Services
Capital Markets Outlook 2015: Following a few years dominated by regulatory compliance and cost saving technology initiatives, financial organizations are finally investing in innovative technology and tools.
Voice Biometrics Improve Transaction Monitoring Fraud Detection
Why voice biometrics should be a part of your fraud prevention strategy in the call center.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.