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thus difficult to execute .
“ Our trading group are viewed as part of the investment process with interaction and culture aligned . That ’ s difficult to replicate using outsourced trading ,” asserted the senior panellists .
It is for this reason that only the most dedicated providers are set to reap success . Speaking to The TRADE , Dean Gray , head of EMEA outsourced trading at Jefferies , explains : “ It has been well documented that the past few years have seen a significant shift in the mindset , especially of the larger funds , towards the adoption of outsourced trading . As larger funds utilise the service , other groups such as sovereign wealth and platform providers are becoming increasingly involved .
“ These groups have an inherent nature of complexity that require outsourced trading providers to heavily invest in human capital and technology to meet all of their requirements effectively .” Despite a degree of caution being exercised by the buy-side , the fact that around 40-45 firms across the industry identify as utilising outsourcing trading in some capacity , is telling . And the number is climbing .
In tandem , 50 providers are now dedicated to handling the gamut of trading needs . This is a significant reality , and a true sign that the industry is changing irrevocably .
As Rebecca Crowe , managing director and chief operating officer , BNY Mellon Markets , previously told The TRADE , “ Years ago , it was the middleoffice who were contemplating outsourcing and people couldn ’ t even consider that you would allow somebody into your books and records in that way .”
Broadly , the providers are independent firms , prime brokerages , and custodians , all with their own pros and cons , unique approaches , and distinct strategies .
The frontrunners across this space are clear to see . The next step for key industry players is now more important than ever as the gap between market leaders and ‘ the rest ’ seemingly widens .
Cost must be balanced with effectiveness When it comes to outsourcing trading , seeking offerings with clear value-add and a smooth operational set-up has been front of mind for firms .
Brendan Burke , Brown Brothers Harriman ’ s ( BBH ) managing director and head of Americas FX sales and business development tells The TRADE : “ Managers need to be comfortable that execution via an outsourced platform is comparable to managing the process in-house . It is important to be clear in terms of identifying activities that are in and out of scope to consider outsourcing .”
However , though execution quality is of course front of mind , the cost saving aspect is becoming an ever-more important consideration for the industry
“ It has been well documented that the past few years have seen a significant shift in the mindset , especially of the larger funds , towards the adoption of outsourced trading .”
DEAN GRAY , HEAD OF EMEA OUTSOURCED TRADING , JEFFERIES
as participants are increasingly forced to juggle mounting regulatory , technological and data-related burdens .
Fees are mounting and when it comes to business strategy , this factor is demonstrably taking precedence – but at what ‘ cost ’?
Aaron Hantman , chief executive of Tourmaline , agrees that , despite the pursuit for quality , the decision to outsource – specifically where to outsource – often comes down to economics , explaining that in some cases this can have negative repercussions .
8 // Outsourced Trading Handbook // 2024