Equities
The buy-side indicated a number of key concerns in our
recent Asia Buy-side Forum in Hong Kong and Singapore
in May. Many of these related to block trading, especially
in small and mid-caps, as well as how regulation would
impact the trading desk and how the trading desk should be
organised.
In Asia, the sell-side is desperately seeking to push electronic,
low-touch trading in an effort to shore up bottom lines in the
face of squeezed commissions and regulatory pressures – yet
this has generated some frustration on the buy-side. Some
asset managers feel the amount of time taken up by the sell
side in meetings and sales pitches has become a nuisance,
to the point where some firms are placing restrictions on the
number of meeting hours the sell-side is allowed per year, in
an effort to cut down on hassling and hard-selling. Discontent
over the services available is also a factor. Participants in
the Asia Buy-side Forum still feel there isn’t enough variation
between the algos on offer, and consequently many buyside houses only use two or three of these at a time.
On broker relationships, one of the key issues of the moment
is whether to make corporate access payments from dealing
commissions - a question that is answered similarly by Hong
Kong and France. In both locations, corporate access will
likely still be allowed to be funded by dealing commissions.
In Europe, ESMA does not forbid corporate access. However,
this means that there could be regulatory arbitrage between
the UK and other countries, since the UK has its own
island solution prohibiting corporate access from dealing
commissions.
As ever, regulatory issues continue to be a significant area
of concern. The Asian buy-side are hoping that the Hong
Kong investor ID scheme will not require identification at the
sub-account level, but instead will simply require the overall
institution making the trade to be named. A more granular
scheme would be “unworkable”, said one.
For more information…
A summary on equities issues in Europe, the US and Asia will
be featured in the next issue of the Buy-side Perspectives,
where we will be able to share the feedback from our
London ATF on 8 June and US ATF in Boston and New York on
14 and 16 June. Also, if you have not already done so, please
check out our 2016 K&KGC surveys on equities commission
rates and block trading, which are both currently live.