Buy-side Perspectives Issue 4 - Page 7

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.