[ O P I N I O N
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O U T S O U R C E D
T R A D I N G ]
Aaron Hantman, CEO,
Tourmaline Partners, responds:
W
e at Tourmaline Partners believe that
this anonymously-written article is a
misrepresentation of what outsourced
trading does, and what its benefits are, particularly
for the buy-side. The author seems unaware that
outsourced trading serves a critical role for firms of
all sizes, from the smaller funds and fund managers
who otherwise can’t afford to be covered by the array
of brokers necessary to enter – let alone compete
in – today’s fragmented landscape for liquidity, to
(more recently) the larger players who use outsourced
trading strategically to complement their existing sell-
side relationships.
Far from the narrowly-focused vendors that the
editorial seems to describe, Tourmaline Partners
is a trading solutions firm providing outsourced,
supplemental and customised trading services to
asset managers of all sizes, since 2011.While the
anonymous writer suggests that outsourced trading
desks are staffed by inexperienced sales traders,
Tourmaline’s team comprises 30 traders averaging
15+ years of experience each, most of whom have
enjoyed distinguished buy-side careers. At one point
the author questions whether outsourced trading
firms would know how to act in a market correction;
the majority of our traders have worked through both
the dot-com bubble and the 2008 financial crisis. We
would put the experience, market knowledge and
service-first orientation of our trading team up against
any buy- or sell-side firm.
The thrust of the editorial is an assertion that
outsourced trading is essentially a vehicle for asset
managers to shift costs to funds. In reality, the benefits
– in some cases the necessity – for a buy-side firm to
use outsourced trading services often have nothing
to do with transaction costs. We are responding
to unique client needs stemming from big-picture,
structural changes to the industry, including the
need to solve complex workflow issues as well as
address cost pressures. And it often includes access to
expertise and markets that firms can’t obtain in any
other way. In any case, our pricing is competitive and
flexible to each client and transparent to all. We can be
paid for by fund commissions and/or the management
company directly.
Outsourced trading empowers the buy-side, it does
24 // TheTrade // Winter 2019
not limit its reach or possibilities
as the author suggests. We help
our clients to address execution
bandwidth issues, expand their
reach, provide access to offshore
markets and ‘away’ brokers, and
help protect or uncover trading
alpha, all of which is tracked
and measured. We can attribute
business for research credit or help
clients navigate the marketplace
with discretion and anonymity. We
can’t speak for the competition,
but unlike the conflicted service
the author describes, Tourmaline
is privately held and positioned to
not compete with the sell-side in
their core businesses of research,
banking and prime brokerage.
The article further suggests that
the broker networks, technology
and compliance features of
outsourced trading firms are
suboptimal. That’s certainly not
the case at our firm, where we
trade in 50 global markets, are
covered by over 400 sell-side
brokers and employ over 40+ algo
suites – which allow us to access
liquidity at all major exchanges,
dark pools and other off-exchange
trading venues globally – on behalf
of our clients.
In the end, perhaps the biggest
misconception in the article is that
“outsourced trading” is somehow
the cause of a shift underway in
the capital markets. As a regulated
broker-dealer serving global
markets, we are intimately aware
of the structural changes impacting
our industry on both on the buy-
and sell-sides. And we are sensitive
to the disruption that these
changes – in the form of regulation,
technological advancements in
trading and research, reduced
commission wallets and passive
management, to name a few –
have caused. Our outsourced and
supplemental trading provide