U.S Equity Traders Search For Next-Generation Algos To Combat Ongoing Market Volatility

A gloomy year in 2011 and a bleak economic outlook has caused traders to rethink their broker selections, services and payment models, according to a new TABB Group report.

On the shoulders of ongoing market volatility, U.S. equity traders are increasingly searching for next-generation algorithms and innovative coverage models, according to a new report from TABB Group.

A gloomy year in 2011 and a bleak economic outlook has caused traders to rethink their broker selections, services and payment models, says Miranda Mizen, a TABB principal, director of equities and co-author with research analyst Anna Jones of the report, "US Equity Trading 2011-2012: Coverage under Fire".

"Good coverage wins order flow and this is clearly one of the areas where size is not an indicator of quality. It's also where non-bulge bracket brokers can excel," she says.

Amidst the glooomy economic landscape, traders are concerned about market quality, being gamed and increased pressure in balancing research payments, commission commitments, support needs and technology infrastructure, Larry Tabb, CEO and founder of TABB Group, commented.

"Armed with still-depleted commission wallets, the buy side faces a daily battle against market mayhem that has reset the needle on the dial of normality in a marketplace where only unpredictability is certain," Mizen added.

TABB Group interviewed 68 long-only head equity traders at U.S. asset management firms with an aggregate $9.8 trillion in assets under management (AUM).

For 2012, traders say they expect to consolidate their algorithm providers, rewarding brokers that provide innovative products and blueprints of how their algos and smart-order routers work.

"The economic outlook's uncertain, consolidation's still in the cards and the electronic space is under pressure, but there are upticks in volumes and commissions," Mizen says, "Brokers offering new ways of thinking about the market and innovative products that crisscross the execution channels as easily as their clients have every chance of winning order flow."

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