03.09.2012
By Terry Flanagan

Simplifying Global Markets for Buy Side

Global connectivity is a top priority for buy-side traders, but many are challenged by the costs of doing business abroad.

Today’s global capital markets are complex due to the changing market structure landscape. Buy-side traders are feeling the omnipresence of high-frequency traders, whose mission statement is to invest in technology and infrastructure that is a definite, yet costly, way to make the fastest trades around the world. HFT has often been vilified by buy-side traders, but some believe the two are incomparable.

“The needs between the buy side and HFT are so different,” said Chuck Garcia, global head of asset management marketing at TradingScreen, a provider of electronic trading solutions that order management, liquidity aggregation, and execution.

Founded in 1999, TradingScreen’s suite of products span broker-neutral execution management systems (EMS), that include in-demand features, such as transaction cost analysis (TCA) toolset.

Garcia cited that HFT is in need of technology that can support a massive number of speedy executions, whereas TradingScreen is in the business of marketing to traders relying on intelligence over speed.

Many of TradingScreen’s clients are hedge funds; hedge funds that enjoy using the firm’s multi-asset class trading platform.

“EMS’s have grown up to, by design, support one specific asset class, but we’ve chosen to devise a multi-asset class platform from the beginning,” Garcia told Markets Media.

The advent of consolidated and dynamic multi-asset class platforms can provide a sense of relief for buy-side traders that are committed to multi-strategies, such as MSD Capital, an asset manager most noted for its management of Michael Dell’s private capital.

“We focus on a multitude of strategies that span large credit bets, real estate, private equity, and long/short equity,” said MSD’s chief information officer, Kurt Burngardt. “We’re selective about our investors because we want to make sure they’re in line with our very long-term view.”

A long-term view isn’t exactly on the radar of HFT firms, who prioritize speed and low latency to make wins. Quality of execution at a multitude of sources is paramount, according to Burngardt.

“Best execution is something we spend quite a bit of time and money on,” he said, noting that the firm is in the middle of building a custom broker commission dashboard.

Developing technology to further scrutinize brokers has also been a growing trend in a world where “there are pressures to reduce costs”, Garcia of TradingScreen told Markets Media. The firm acquired Citigroup’s Best Execution Comparison Services System, which offers TCA via a post-trade multi-broker platform.

Though brokers are scrutinized for adding value in a world of rising costs for the buy side, Garcia noted that traders today are looking for brokers with a local touch.

“We have installed local data centers around the world to give our clients the global connectivity they need in a low latency environment,” he said. “Our local data centers also work closely with local brokers that can provide customers with global market access. It doesn’t make sense for one of our clients in South Korea to use a Brazilian broker because of the high costs managing different time zones.”

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