[ T H O U G H T
L E A D E R S H I P
|
“Dealers are well placed to challenge the service
quality of outsourced vendors and, in so doing,
ensure continual improvements and better
execution quality.”
the conflation of portfolio manager
and dealer roles.
Often, allocating in-house time
and cost to remedy these concerns
is hard to justify. As a result, firms
are looking to outsource trading to
a third-party – one that is suitably
large and secure, ideally with
access to broad liquidity and global
presence – so no breaks arise in
oversight and control processes.
However, it’s important to
remember that asset managers
can outsource activity but not
responsibility. For this reason,
the oversight function gains even
greater importance, as does the
person performing it.
Augmentation and evolution,
rather than displacement
A common criticism of
outsourcing has been that it is
essentially an exercise in reducing
staff numbers. However, we have
found that, unlike traditional
outsourcing – which replaces like-
for-like at a cheaper unit cost –
outsourced trading removes fixed
costs and can involve greater staff
retention.
Head of dealing and third-party
vendor relationships
In light of increased regulatory
obligations to ensure sufficient
oversight and control exists over
third-party vendors, the person
in charge of the relationship gains
greater significance. A strong
argument exists that the best
person to assume this role – and
satisfy the regulator – should be
someone who understands trading.
N O R T H E R N
T R U S T ]
Dealers are well placed to
challenge the service quality
of outsourced vendors and,
in so doing, ensure continual
improvements and better
execution quality. Moreover, they
are best placed to understand
and communicate the outcome of
transaction cost analysis (TCA),
the intricacies of client queries and
interactions with regulators.
An opportunity to become part of
the solution
Outsourced trading offers dealers
an opportunity to become part
of the future. Using their unique
skill-sets and market experience,
dealers may be able to help shape
their firm’s outsourcing model.
They can potentially create
roles for themselves that not
only remove complexity and risk
but also enhance operational
efficiency, simplify the application
of regulation and lower cost –
something to be welcomed by
regulators, shareholders and
investors alike.
Issue 61 // TheTradeNews.com // 65