Natasha Shamis On The Broker’s Role08.22.2018
What is the broker’s role as a technology provider in the current market structure?
I think at this point technology is a must have when it comes to capital markets. It’s not even a choice – it’s non-negotiable. I don’t know if I would call brokers technology providers as much as saying that they had to evolve their services through the use of technology.
If you think about the traditional more manual slate of services that brokers were providing they’re just not scalable anymore. It’s not an option for a trader to wait for a call from a broker or a high-touch desk to give them market color or a consultation under execution strategy or source them unique liquidity.
For example, if a trader is trading some small-cap stocks and they’re really struggling to find liquidity rather than relying on a broker to call up a few counterparties interested it’s going to be a lot more effective and precise if there is a technology system that has information on who can be the other side of the trade. Anywhere in the world.
Capital markets are a lot more global now, so that trader can find the other side somewhere where a broker may not even think to call unless they have a technology system to identify that person. Or if you think about the amount of stocks that a very busy trader is trying to monitor on their order pad, they’re trying to look at all of those at once and traditionally they might have gotten a call from a high-touch desk that is advising them. The desk might advise on how to course-correct because they saw something in the market but by the time the trader gets that call it might be already too late to respond. But, if they had a system that is monitoring all of those stocks – alerting them of any market conditions that are changing – and allowing the trader to course-correct in real-time across the entire order pad, that’s a very powerful tool. And it’s not just enough if you just alert the trader over and over again but to have systems that are sophisticated enough that they think about the factors that are most important to what that trader needs and helps him adjust his trading style.
So, their work what their portfolio manager is looking for so it’s not only the technologies at this point the baseline it’s an imperative and broker services the technology itself has to become more sophisticated too. I actually think that when we talk about traders and what they need in this industry we see at the end of the day they’re people too – consumers just like you and I – and expect technology driven products. They ask and we have to be able to answer the question ‘why wouldn’t we have the same expectation in own industry?’ If I’m booking a trip I no longer have to call a travel agent the same way that I used to. I can now enroll and book my hotel and book my flight, my car rental online. If I want to go and kayak I can go to TripAdvisor or go on Airbnb. I now have access to data across many different hotels and airlines and while there are still travel agents we still can now offer other and better tools. Traders have much better data access and it’s accessible to all of us. And when we think about trading and the saturation of broker services it’s centers more about following the trend we’ve seen in every other industry. Brokers will just need to leverage technology more for their premium high-tech services in order to evolve.
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