Roughly two-thirds of the equity-focused buy-side firms considered changing trading technology providers in the past year, according to a recent study from Coalition Greenwich.
These deliberations were driven by the desire for better customer service, improved trading and analytics capabilities, and enhanced data and reporting functionality, according to the findings.
“Trading technology is crucial for asset managers, who face decisions about trading workflows and rely on providers offering exceptional performance and customer service,” said Jesse Forster, Senior Analyst at Coalition Greenwich Market Structure & Technology and author of Trading Technology Unveiled: Insights into Buy-Side Behaviors and Priorities.
He said that strategic priorities for buy-side firms revolve around core business growth and cost management.
“They aim to enhance middle/back-office processes, optimize costs and reallocate resources for greater efficiency,” he said.
Coalition Greenwich in collaboration with CMC Markets gathered feedback from 201 equity-focused buy-side market participants across Europe, Asia, Latin America, North America, and the United Kingdom in April 2023.
Respondents included traders, heads of trading, investment advisors, wealth managers, private bankers, and C-suite executives who possess knowledge of their firms’ trading technology.
According to the findings, boutique institutional equity investors are less-than-satisfied with the support they are getting from their trading technology providers.
However, fears of the potential disruptions associated with a change in vendors often cause asset managers to stay the course with current partners.
Despite their lack of satisfaction with current providers, only one-in-10 followed through and switched vendors.
Firms that opted to stick with current providers after contemplating a change said their decisions were based on concerns about the time and costs of integrating a new trading platform with existing workflows and systems, the report revealed.
The “buy, build and integrate” approach is gaining traction as buy-side firms combine pre-built platforms with proprietary systems, Foster said.
Hybrid setups are popular, favoring a mix of proprietary and third-party solutions, he said.
While larger firms often build fully proprietary systems, they are increasingly considering third-party platforms due to their cost-effectiveness and functionality.
“Trading technology is the lifeline of asset managers, the pulse of their operations and the driving force behind their competitive edge,” commented Forster.
“As firms work to transform these critical systems, their choice of external partners and providers will have far-reaching consequences,” he said.
Forster said that the performance of external technology partners is of critical importance to buy-side firms as many are in the midst of technology overhauls designed to enhance the efficiency of the platforms that support trading and other core functions.
For example, more than half of the buy-side firms taking part in the Coalition Greenwich study name enhancing middle- and back-office processes and technology as a top strategic priority for their organizations.
According to these firms, the ideal trading technology solution combines efficient performance, multi-asset-class trading capabilities, and integration with other trading platforms or brokers.
Seamless integration and customization options are crucial for success, Forster said.
“Third-party technology providers are becoming increasingly essential and providers that prioritize ease of use, scalability, customization, comprehensive training, and high-quality support will unlock growth opportunities and establish trust within the industry,” he added.
