04.01.2014
By Terry Flanagan

Low Touch Is the New High Touch

Electronic trading is a mixed blessing for some buy-side traders, bringing reduced commissions and tighter spreads at the cost of greater complexity.

“From a buy-side perspective, low touch is high touch,” said Diana Avigdor, portfolio manager and head of trading at Barometer Capital Management, a Toronto-based asset manager. “Whether I punch the button or my broker punches the button, it’s still all electronic.”

So why would Avigdor choose to pay a full-service fee versus punching the button herself? It’s because electronic trading is low touch for the dealer, but it’s high-touch for the buy side. “It’s a lot more high touch for me to trade electronically than to give it to a dealer,” she said. “If I give it to my trusted broker, then I can go to a meeting or get on a conference call. If I put all my orders through electronically, and I have to manage all the different algorithms, that is very high touch for me and I can’t leave the desk.”

Barometer Capital Management researches and ranks over 63,000 global securities in more than 41 industry sectors in order to identify companies and securities exhibiting characteristics found in companies undergoing a positive change. “We are extremely disciplined asset managers,” said Avigdor. “We strive for absolute returns. We buy relative strength and sell relative weakness.”

Avigdor heads up the trading team while overseeing international investments. This includes daily sell-side monitoring and the provision of market intelligence on trading flows.

Market structure changes that have taken place over the past 15 years, in particular the advent of maker-taker pricing, has resulted in reduced spreads and commission rates, but these are only the explicit costs of trading. “We don’t know what the implicit costs are,” said Avigdor. “We keep trying to calculate implicit costs from TCA programs, but they’re not accurate. We know we’re saving money, but we don’t know how much. We are complaining that there are issues with HFT and market structure rules that may be unfair.”

Avigdor is a strong proponent of a single Canadian national securities regulator, an idea that was championed by Canada’s former minister of finance, Jim Flaherty.

“Absolutely there is a need for a single national regulator,” she said. “It’s not a new idea, but it’s the closest we’ve gotten. Hopefully it doesn’t get derailed by Mr. Flaherty resigning.”

The Canadian Bankers Association today commended Flaherty on his tenure as finance minister of Canada.

“I applaud him for his vision and determination to put in place a cooperative common securities regulator,” said CBA president Terry Campbell in a statement. “Canada is the only industrialized country without a national securities regulator and we continue to believe that Canada needs a single national voice on the international stage. Few others would have shown such tenacity as Minister Flaherty has over time on this issue.”

Featured image via iStock

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