More than half of buy-side traders globally struggle to get proper coverage from their brokers—a problem that reflects less on brokers’ commitment to deliver high-quality service, and more on traders’ rapidly evolving coverage needs at a time of technological advancements and changing market structures.
Almost all buy-side trading desks now use electronic execution for some part of their trading volumes, and individual traders usually have at least some say about which trading channels they use for specific trades.
“In this new market environment, partnership with brokers and fintech providers is more important than ever to buy-side trading desks,” says Jesse Forster, Senior Analyst at Coalition Greenwich Market Structure & Technology and author of Global Equities Trading: Broker, Algo and EMS Selection. “Unfortunately, many traders see their brokers as falling short in terms of basic, day-to-day coverage.”
One reason that 54% of traders say they struggle to get proper coverage is that traders do not entirely agree on what proper coverage looks like. Almost half the traders participating in a new study from Coalition Greenwich want separate coverage relationships with their brokers’ high- and low-touch desks. Some traders in this group cite the need for specialization, arguing that the younger professionals who generally staff sell-side algo trading desks often lack overall trading knowledge, and the more experienced sell-side cash traders lack expertise with algos.
Other traders participating in the study suggest differences in coverage preference are sometime age-related, with older buy-side traders often preferring separate coverage for high-touch and low-touch trades, and younger traders recognizing the value of an integrated, hybrid model.
Global Equities Trading: Broker, Algo and EMS Selectionanalyzes the biggest “pain points” experienced by buy-side traders, including securing proper sell-side coverage, overcoming operational issues and settlement aggravations. The report also examines the top factors buy-side trading desks consider when picking brokers and allocating commission dollars for both high-touch and low-touch trades, the primary algo strategies utilized by buy-side firms, and the types of equity trading systems employed by buy-side trading desks.
Source: Coalition Greenwich
