Exchanges

10:57 AM
Steve Grob
Steve Grob
Commentary
50%
50%

Could Social Media Revive High-Touch Trading?

Maybe the return to high-touch trading is achieved by overlaying social media concepts on top of the low-touch networks that now proliferate the industry.

The past decade has witnessed the wholesale electronification of global trading. The term "low touch" was coined to describe exactly this and the electronic routing of client orders to markets with the minimum of intervention from their broker. This meant that the value add of the sales trader was increasingly denuded and the key differentiators became simply cost and market coverage.

It's interesting to note, then, that at the International Trader Forum in Madrid last week a number of high profile buy-sides were talking about a return to full service, high-touch brokerage. This is because a combination of persistent low volumes and increased venue complexity are making it harder and harder to get orders filled. On top of this, the desire to avoid predatory HFT activity has meant that firms want to know exactly who they are dealing with and the likely outcome of showing their hand at any given venue.

This has always been the preserve of the high-touch world, where managing the relationship was the key to success – liking and disliking different counterparties and having different circles of contacts to interact with depending upon any given trading objective. This is what traditional brokers were able to provide to their clients and, in some cases, still do. But now there’s a new game in town. In parallel with the electronification of markets, the rise of social media has shown how relationships are now forged, maintained and evaluated electronically.

The combination of the two creates some intriguing opportunities that might finally prove how social media and financial markets are supposed to work together. Market pioneers are starting to make this connection -- such as Tony Mackay (founding CEO of Chi-X Europe) with MKarketBourse -- but you wonder if an exchange is even needed at all. Historically exchanges provided a physical meeting place for interested parties to engage in price discovery, but increasingly these same parties can now find each other in cyberspace.

So maybe the return to high-touch trading is achieved by overlaying social media concepts on top of the low touch networks that now proliferate the industry. This would enable different counterparties to not only find each other but also build and extend their relationships based upon shared interests or capabilities.

However all this pans out, the current difficulty in finding suitable liquidity means that a return to more relationship-based trading looks a distinct possibility. The use of social media in this way could provide high-touch service but without the high cost.

Steve Grob is director of group strategy for Fidessa.

Comment  | 
Print  | 
More Insights
More Commentary
Is Big Data a Problem or an Opportunity?
When it comes to data, financial services firms are, as a rule, quite circumspect. They fear cyberattacks, data theft, data loss, security breaches, data privacy, and human error.
Data Integrity: A Necessity, Not an Option
Financial institutions that have taken on the data integrity task in the past now have to spend more money on hardware, software, and people just to keep up with the demand.
What Colombia’s New IT Campaign Means for Latin American Tech Investment
Colombia’s campaign is the latest example of how Latin America is trying to edge into the global technology space.
Initial Margin: When Does More Turn Out to Be Less?
Changing margin regulations are set to affect the OTC derivative market, including initial margin risk models for non-cleared OTCs.
The Mainframe Innovation Drag
It may be time for a consortium of firms motivated around the objective of eliminating the mainframe. What if every self-clearing firm decided to participate in building a modern, back-office system as an open-source, cloud-based project?
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - July 2014
In addition to regular audits, the SEC will start to scrutinize the cyber-security preparedness of market participants.
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.