THETRADETECH DAILY news
THE OFFICIAL NEWSPAPER OF TRADETECH 2023
Buy-side
Outsourced trading landscape continues to shift as banks prepare for a new wave of interest
MAJOR SERVICE PROVIDERS INCLUDING BNY MELLON , STATE STREET , UBS AND NORTHERN TRUST HAVE ALL EXPANDED THEIR OUTSOURCED TRADING CAPABILITIES TO MEETING GROWING DEMAND FROM BUY-SIDE ORGANISATIONS .
Outsourced trading , despite its controversies , has seen increased demand from market participants resulting in increased investment from custodians and other service providers in their offerings to cater for the trend .
New initiatives to provide outsourced trading have been framed by these providers as a means to deliver improved operational and strategic efficiencies , reduced costs and expansion opportunities .
The outsourced trading model has been favoured by the hedge fund community in the past , but is now seeing increased appetite from long-only traditional buy-siders .
In January , BNY Mellon announced that it would provide a new outsourced trading offering for buy-side institutions globally – powered by xBK , the firm ’ s buy-side trading division – giving clients the ability to reduce spending on data , trading infrastructure , analytics and reporting , as well as all associated trade execution support functions .
The financial services giant stated that clients will be able to improve trading outcomes through automation , innovation and a systematic workflow ; receive access to its portfolio of services across front- , middle- and back-office functions ; alongside refocusing investments toward core competencies and alpha generating activities .
Earlier this month , one of BNY Mellon ’ s biggest rivals , State Street , confirmed it has entered into a definitive agreement to acquire outsourced trading firm CF Global , as first reported by The TRADE in February .
The move will give the custodian access to CF Global ’ s extensive relationships in the space as a segregated outsourced trading firm – expanding its current outsourced trading offering in the Americas , APAX and Middle to now include the UK and Europe .
In 2021 , UBS also joined a growing list of major market participants to offer an outsourced trading desk in a bid to help buy-side traders with their growing workloads and to help asset managers and hedge funds as they look to cut costs .
In addition , Northern Trust Capital Markets said it has seen significant growth within its Integrated Trading Solutions business , with the platform more than doubling over the past three years . In 2022 , the business added 22 new clients with an increase in asset managers choosing the platform for their outsourced trading needs .
The outsourced trading capability from Northern Trust combines global trading expertise in equities and fixed income , exchange traded derivatives , futures and exchange traded funds ( ETFs ) across global markets . In addition , Northern Trust stated that its Integrated Trading Solutions platform helps asset owners and asset managers to lower costs , reduce risk , manage regulatory compliance and enhance transparency and operational efficiency .
“ The growth of our Integrated Trading Solutions business is a testament to our team ’ s dedication to helping Northern Trust Capital Markets clients solve their challenges across the trading spectrum ,” said Glenn Poulter , global head of brokerage at Northern Trust .
“ Achieving alpha is more difficult than ever before , and by outsourcing their trading function , clients can focus on investment decisions that deliver meaningful results .”
Outsourced trading , despite increasing development from major market players , does come with its controversies . Namely , traders viewing the development as supplanting their roles .
Despite this , economic pressure and increasing complexity in markets has led to demand from investment managers for outsourced trading services to increase significantly . This can often be an individual asset class , a region , or the entire desk . A report from Coalition Greenwich last year found that the number of providers in the outsourced trading space had increased by more than fourfold in the last five years , growing from fewer than 10 to more than 40 from 2018 to 2022 .
10 THETRADETECH DAILY