THETRADETECH DAILY THE OFFICIAL NEWSPAPER OF TRADETECH 2024
Adrian Bradshaw :
Retail liquidity - the current state of play
Senior equity dealer at Invesco , Adrian Bradshaw , sits down with The TRADE to discuss : the key factors to bear in mind when it comes to accessing retail liquidity ; the current challenge for the buy-side ; and the importance of effectively leveraging platforms .
Currently what are the most common approaches when accessing retail liquidity ? When accessing retail liquidity , we would check the usual sources as for any trade , including agency broker block flows , broker indications of interest , which brokers have traded volume recently , and any potential to trade stock on risk . This would particularly be the case if we wanted to trade quickly . In the absence of immediate sources , we may place the order in our internally developed retail algorithm wheel . This will agnostically place a UK retail stock with one of the specific algo retail brokers in the wheel and attempt to access retail liquidity within the selected brokers systems , who will also be accessing the retail service provider ( RSP ) network . Hopefully , this will gain access to retail liquidity which may not be otherwise obvious . Using retail brokers algo products as above should be a useful tool in the search for such liquidity . However , the challenge for the buy-side is to find out which brokers are more likely to be trading in specific names , and at what times of day retail flows appear . In an ideal world , this information would be automated into our execution management system ( EMS ), so that the retail wheel itself can either choose or recommend which broker to select to access liquidity in the most efficient manner .
Can platforms be leveraged to access liquidity more effectively ? All of the above refers to UK equity retail flow and the RSP network . We are aware that most major European countries have increasing volume of retail flow , which is currently difficult for institutions to access , or indeed know how to access . This may be due to a number of reasons , for example some brokers may choose to keep retail and institutional flows separate . As retail volume and especially value increases , it would be useful if these flows were accessible to institutions . Furthermore , for effective and efficient access , it would be useful if this could be traded electronically .
As the brokers in question are possibly smaller regional or national brokers , they may lack the economies of scale or technological capabilities to create similar algo products used elsewhere . Hence this continues to be a challenge to effectively access these retail flows .
“ The challenge for the buy-side is to find out which brokers are more likely to be trading in specific names , and at what times of day retail flows appear . ”
26 THETRADETECH DAILY