[ I N - D E P T H
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P E O P L E
Regulatory Revolt
These days it is almost impossible
to look at any industry develop-
ments without considering the
role regulation has to play. While
this has been a theme for many
years, 2016 (and likely 2017) has
been a crucial year for the buy-side
as it struggles to get to grips with
MiFID II in Europe and a variety
of new regulations in the US.
One trader told The TRADE:
“We’re seeing a far higher level of
regulatory scrutiny than ever be-
fore and you’ve got to embrace the
way things are moving if you want
to get on in this industry. I think
for some, the intense responsibility
and scrutiny is simply too much,
and they would prefer to move on
to other roles where there’s less
risk of getting it wrong.”
Anecdotal reports suggest that
some senior traders have volun-
tarily opted to leave because they
don’t want to face the barrage of
regulatory scrutiny coming their
way. However, others suggest some
desk heads have been pushed out
due to a reluctance to change their
ways to adapt to the post-MiFID
world.
M O V E S ]
Senior managers at asset manage-
ment firms may be keen to reshuf-
fle their trading teams to fill them
with individuals who are more
open to new ways of trading and
who are less likely to be stalwarts
of the old broker crossing network
or sales-trader approaches.
Sell-side withdrawal
“It used to be that you just passed
on responsibility to the sell-side,
but today that’s much less feasible
and the buy-side is increasingly
expected to use sell-side tools to
analyse and manage their trades,” a
trader told us.
With brokers facing increased
pressure not just from regulators
but also their more challenging
financial positions in the post-Leh-
mans era, they are increasingly
scaling back the range of services
they offer the buy-side. Where they
were once one-stop-shops for all
your trading needs, the increased
complexity and cost of this ap-
proach means many brokers simply
cannot afford to service the buy-
side to the extent they once did and
regulators are increasingly seeing
buy-side over-reliance on brokers
as a potential conflict of interest.
Of course, as alluded to above,
this means the job of the average
buy-side trader has become signifi-
cantly more complex and carries
far more responsibility than it may
have done in the past. It is simply
no longer possible for any trader
to simply act as a conduit between
PMs and brokers, they are increas-
ingly required to have a broader
range of analytical skills to provide
PMs with expert advice and to
thoroughly scrutinise the activities
of their sell-side counterparts.
Teching up
Perhaps the biggest change for
a buy-side trader over the past
couple of decades is that they have
become more masters of technol-
ogy than masters of people. While
in the past, building relationships
with sales traders was one of the
key skills required to trade securi-
ties, today those relationships have
The buy-side is increasingly expected
to use sell-side tools to analyse and
manage their trades.
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TheTrade
Winter 2016