[ I N D E P T H | O U T S O U R C E D T R A D I N G ]
“ If firms can receive front- , middle- and back-office solutions packaged as one and have to sacrifice the trading quality to get those economics they often do it ,” he explains .
This can in many ways be put down to the decision to outsource generally coming from the c-suite and other senior leadership individuals – a controversial reality which many in the market have openly criticised for being an approach which omits important insight from trading teams .
“ In terms of who makes that decision [ to outsource ] of course it is down to the people who are motivated by , and tasked with , looking at overall operating model transformation and cost efficiency – which are generally COOs and CFOs said Crowe .
She added that even when it comes to how decisions are being made as to the structure of outsourced offerings , capital considerations are commonly at the fore , specifically efficiency and more variability with costs .
Of course , this is an understandable reality , given the current state of the market ,
“ If you look at the last couple years there has been an evolutionary rate of acceptance which has accelerated recently . It suggests that the concept of outsourcing or supplemental trading has become institutionalised .”
AARON HANTMAN , CHIEF EXECUTIVE , TOURMALINE
however , potentially sacrificing trading quality in the pursuit of capital saving is a high price to pay . Advice about cutting off noses to spite faces comes to mind , but as Hantman tells The TRADE , many times this situation arises not through any nefarious means , but because of a certain degree of naivety .
“ People truly do not understand in many cases just how badly trading could be compromised ,” he says . “ Those who make wholesale changes without understanding the impact at the trading level will soon have to reverse out of them a year or two later .”
As firms continue to place a growing degree of trust in these providers , this should theoretically work to foster effectivity .
“ Like many managed services , a provider needs to have scale and be able to deliver a quality offering combining client service , technology and trading expertise . It can ’ t simply be shifting trading responsibility from a manager to the provider ,” highlights Burke .
The buy-side agrees and discussions at conferences across this calendar year have focused on the importance of alpha retention in this space .
As one TradeTech Europe buy-side panellist affirmed : “ Understanding the clients and the
10 // Outsourced Trading Handbook // 2024