Equities
Buy-side equity trading is back to business
Kristian Karppi, MD, K&K Global Consulting
After years of regulatory discussions, it was refreshing
to primarily spend time on topics pertinent to improving
trading at the Alpha Trader Forum equity debates in
Stockholm, Paris, Frankfurt and London in May.
I would like to start with a comment made by a prominent
head trader who said “A sell-side high touch trader is not
only for Christmas!”. One of the key themes for 2019 is to
establish the future of high touch trading in the new MiFID
II market. The buy side verified that the liquidity profile
of each broker has become the major differentiator and
certain high touch traders have gone back to old-school
working of orders and delivering mega blocks that you
cannot find elsewhere. There are good trusted sell-side
relationships out there and the buy side have the choice
of supporting such value-added relationships or face
increasing levels of ‘juniorisation’. A trusted established
sell-side relationship is precious and can neither be
easily replaced by another person nor will the buy side
2019 - IN STRATEGIC PARTNERSHIP WITH:
automatically start trading with another sell-side firm who
acquires this relationship from a competitor.
With trading volumes being down, there are increasingly
tougher discussions between the buy side and sell side
about the financial return compared to risk for each
relationship. These discussions can be complex as the
relationship may span across multiple asset classes and
geographically across many continents.
Overall the buy side are trading a larger proportion through
trading algorithms and crossing networks to gain control of
their execution and minimise signalling risk. The buy side
at each regional ATF contributed by detailing their current
preferred trading algorithm providers by strategy to gain
an unbiased benchmark to compare against their existing
choices. The best form of ‘thank you’ we received for these
research efforts was that, based on the peer feedback, some
heads of trading attendees will look to reach out to new algo
providers who have previously not been considered.