[ I N D E P T H | O U T S O U R C E D T R A D I N G ]
“ It is important to be clear in terms of identifying activities that are in and out of scope to consider outsourcing .”
BRENDAN BURKE , MANAGING DIRECTOR , HEAD OF AMERICAS FX SALES AND BUSINESS
DEVELOPMENT , BBH
markets you trade is essential . You need to think of the trading desk as the engine that drives the room . Those conversations around news flow and pricing are central . An active manager needs an active desk .”
However , the crux is that this is not so easily achieved by an outsourced trading provider . Across the outsourced trading space , the barrier to entry has historically been low , but the barrier to success arguably remains high .
As Gray explains , “ as the industry has begun to mature , each offering is becoming more clearly defined . The reality is many are not prepared to make the significant investments required to maintain or grow their share of the market .”
The important impact of changing market sentiment Demonstrably , things are ramping up and outsourced trading providers are highly cognisant of the importance of keeping up with the pack in this high-stakes game .
However , importantly , various sources speaking to The TRADE have confirmed that a shift of market sentiment has contributed to the development of this space . What started as a foot in the door , has widened into a significant entryway , with market participants – who were at one time not just hesitant , but hostile – now tuning into the importance of embracing change . A recent LSEG and Coalition Greenwich report from Q4 2023 highlighted exactly this uptick in views around outsourced trading , wherein 66 % of buy-side respondents confirmed their belief that outsourced desks could provide them with better access to liquidity , while 63 % highlighted improved execution quality and trade performance .
The responses included views from 45 buy-side equities market participants across the US and Europe , of which 28 % expect their firms to ‘ at least consider ’ adding an outsourced provider over the next two years . One respondent specifically commented that “ outsourced providers act as an extension to the trading desk and understand our trading goals ”.
Hantman tells The TRADE : “ Between 2017-2019 , especially in the UK and Europe , there was a lot of pressure for traders to justify their worth , especially considering things like Mifid II unbundling . At that time , the last thing that a trader wanted to hear about was the wonderful attributes
2024 // Outsourced Trading Handbook // 11