Buy Side Outsources Dealing Services02.09.2021
Managers need dealing experts dedicated to delivering performance and best execution with deep market knowledge and a client-centric approach.
The disruption caused by the Covid-19 pandemic has accelerated the need for buy-side firms to focus on operational priorities, including which functions they should keep in-house and which ones they should delegate to a third party. One function under operational review is dealing, as managers look for solutions to rising technology costs and regulatory constraints.
The move towards outsourced dealing is also the result of a broader trend among fund managers to seek an outsourced solution for a growing range of front-office processes and functions, something often described as the third wave of outsourcing. Indeed, the impact of rising technology costs for trading infrastructure, operational challenges and regulatory obligations accentuated by the pandemic has increased fund managers’ interest in outsourced dealing. Asset managers are also facing market complexity to access counterparties and liquidity especially during major market events.
Amundi is one of the few asset managers able to offer outsourced dealing services on clients’ orders to other buy-side firms, with global access across all markets and time zones. The service has been running since 2005 with currently has more than 40 clients, supporting them in their organic growth and AuM objectives.
The solution offered by Amundi covers order reception; trade analysis to define the best execution strategy for all asset classes and geographies; order execution; and reporting. Depending on the client’s operating model, the solution also covers middle-office services for post-trade processing.
Global Trading Operation Model
Although the demand for outsourced dealing is increasing, there is still some resistance from firms concerned about delegating front-office tasks to another investment manager and worried that they will lose their connection to the market because they are no longer interacting with their brokers. However, within the Amundi offering, clients keep their relationships with brokers and analysts and also keep their access to research. Further, all trades are carried out in the client’s name, thereby maintaining their visibility in the market.
As Amundi is the European leader in asset management1 with more than €1.65 trillion AuM2, clients benefit from its capability and standing in the market, including access to liquidity and bargaining power with the sell side. The dealing services solution is built around four international trading desks – Singapore for Asia securities; Dublin for Americas; London for FX; and Paris for other asset classes. To ensure best selection and liquidity, clients benefit from a strong and rigorous selection process for counterparties based on quantitative and qualitative criteria. The list is customizable for each client through a yearly selection process.
Cutting-edge technology is a key differentiator for a trading desk, and the emphasis on technology puts pressure on trading desks’ budgets to deliver on clients’ needs and meet and exceed market standards. Trading platforms not only need to be connected to more venues; they also need to employ best-in-class smart order routing technology and invest in transaction reporting tools. Dealing has also become a more complex process as a result of more sophisticated investment strategies. In the search for yield, asset managers are looking at emerging markets and more exotic asset classes, all of which require extra resources.
Consequently, Amundi developed a system called ALTO* Trading to support the dealing operations. This system is used by Amundi’s traders and is responsible for more than 2.2 million trades every year benefiting from seamless connectivity to execution venues and execution management systems. The technology underpinning the platform is secure, robust and offers high performance. ALTO* Trading, part of ALTO*, a full Portfolio Management Solution, is the module for traders to capture, analyse and execute orders for all asset classes.
Amundi makes continuous improvement on its outsourced dealing service to develop additional functionalities for clients. One new feature is a digital reporting tool, accessible via a web portal, that empowers clients to directly access analytics and generate operational and regulatory reporting.
Gianluca Minieri, Deputy Global Head of Trading – Amundi Intermediation:
“Our dealing experts, organized by asset classes and by markets, are solely dedicated to delivering performance and added value via deep market knowledge and a client-centric approach. As a dealing services provider, we ensure an equal treatment for all our clients and a strict data segregation to offer best selection and best execution for all asset classes and cross time zones. This gives us access to more liquidity pools.
All of this complexity has intensified since Covid-19. It is easy to trade when liquidity is abundant. But when liquidity is disappearing from screens, it becomes a much bigger concern. Added to that is the challenge of setting up your traders to work from home with all the equipment that comes with it.
Furthermore, volumes have actually increased during the pandemic leading asset managers to examine their operating expenses even more intensively and, naturally, this leads most of them to consider outsourcing. The trend for outsourced dealing is changing, even before the crisis and we are seeing more interest in larger players, including buy-side firms, that already have a trading desk.”
For more information, please contact:
Business development Amundi – Dealing
*Amundi Leading Technologies & Operations
- Source: IPE “Top 500 asset managers” published in June 2020 and based on AuM as at December 2019.
- Source: Amundi as at 30/09/2020
The information contained in this article is deemed accurate as at 31 December 2020. Data, opinions and estimates may be changed without notice. Document issued by Amundi Asset Management, a French “société par actions simplifiée”- SAS with capital of 1 086 262 605 euros – Portfolio Management Company approved by the AMF under number GP 04000036 — Registered office: 90 boulevard Pasteur — 75015 Paris — France — 437 574 452 RCS Paris – www.amundi.com