THETRADETECH DA I LY
in-depth
THE OFFICIAL NEWSPAPER OF TRADETECH 2018
SELL-SIDE
Sell-side will seek ‘deeper
partnerships’ as margins shrink
EVER-INCREASING COSTS ON SELL-SIDE INSTITUTIONS WILL SEE MORE CONSOLIDATION AND DEEPER PARTNERSHIPS,
ACCORDING TO A KEYNOTE DISCUSSION PANEL.
I
ncreasing pressure on margins at sell-side
institutions will see some consolidation and
“deeper” partnerships forming over the next
few years, according to leading market partici-
pants.
Speaking on a keynote discussion panel, rep-
resentatives from ITG, Goldman Sachs, SEB and
SIX Swiss Exchange agreed that significantly
higher costs have crippled margins at sell-side
firms.
“The sell-side has huge costs and these are
continuing,” said David Shrimpton, managing
director of the securities services division at
Goldman Sachs. “It costs a lot of money to put
the infrastructure in place to route to all sys-
tematic internalises (SIs), with data or analytical
costs, connectivity, testing, audit trails.”
He added: “For a firm like ours where we have
reasonable market share in equities we need
to optimise our value chain at every level, but
for someone running an equities business with
less than 3% market share, we will see deeper
partnerships as we look at margin erosion
throughout the year.”
ITG’s managing director and head of electronic
sales, Duncan Higgins, added that the amount
of work needed to be carried out from a connec-
tivity and development standpoint has a major
impact on costs at sell-side institutions.
“The flip-side is there are always new entrants
Simon Taylor, head of equities electronic
execution at SEB, also explained that the costs
of regulation in terms of implementation of the
technology are extremely high, but regional in-
stitutions are far more challenged in this aspect.
“The barriers to entry from an electronic trad-
“The barriers to entry from an electronic trading perspective do not
cease, and my concern is the drive toward outsourcing which is a
given. Regional players in particular will face challenges about what
they will outsource”
SIMON TAYLOR, HEAD OF EQUITIES ELECTRONIC EXECUTION, SEB
in the technology space with new products to
make those tasks a little easier,” he countered.
“You can have a combination of outsourcing
some of those activities or buying and develop-
ing internally. I think it’s that which is stopping
massive consolidation or the shutting down of
broker businesses as quickly as people think it
will happen.”
ing perspective do not cease, and my concern is
the drive toward outsourcing which is a given,”
said Taylor. “Regional players in particular will
face challenges about what they will outsource
but that will come down to the core clients. My
fear is that despite regional players create a
unique value, they will become smaller as that
value proposition becomes mixed.”
Issue 2
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