[ I N D E P T H | B U Y - S I D E P E R S P E C T I V E ]
when we asked about the main drivers for outsourcing trading , the second most common answer was ‘ the pursuit of growth while controlling cost ’, with 30 % of respondents highlighting this as the main reason for outsourcing trading .
While the decision to outsource trading being made by someone who doesn ’ t work directly on the desk may be a source of frustration for traders , establishing - or even maintaining - trading desks can be costly . At the same time , as fee pressures and revenues weigh on fund managers , the costs of staffing – i . e . a trader , back-up and ops teams – can be costly , along with technology , software , Bloomberg Terminals , data feeds , storage , and all the other elements required to operate an efficient desk .
As The TRADE has pointed out previously , when entering into outsourced trading arrangements , the cost impact for the buyside , regardless of size , is significant , albeit in an unexpected manner . Costs are not necessarily realised in terms of hard dollars or pounds , but in terms of who , or which part of the business , is paying for the outsourced service .
Through an agreed basis point commission on trades that are executed by the outsourced trading provider , the fund that is most active and trades the highest volumes within an asset management firm foots the bill . The bottom line is that it is the fund that pays for the outsourced trading service .
With providers sharpening their arsenals , adding talent , asset classes and expanding regionally , the case for leaning on these firms is building up , and even turning the most battle hardened of buy-side traders .
While overall , the concept may still have elements of controversy and carry disdain among some members of the buy-side , it is fascinating to see the shift towards acceptance – and even praise – as more and more asset managers turn to at least some form of outsourced trading .
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