Block Trading by Asset Managers Hits Six-Year High, OMS/EMS Solutions Under Pressure


Tabb Group – NEW YORK & LONDON – According to TABB Group, block trading volume for asset managers rose to 19% in 2015, surpassing levels last seen in 2009 due to changes in investment strategies, access to new liquidity sources and new block trading methodologies. The ability to trade blocks is a critical part of trading strategies and leveraging an integrated workflow through an execution management system (EMS) and order management system (OMS) is essential for the buy-side. Part two of TABB Group’s 12th annual benchmark study, “US Institutional Equity Trading 2016: Blocks & Trading Tackle (Part 2 of 3),” examines trends related to block trading, capital usage, conditional orders, and the crucial role of the EMS and OMS in supporting buy-side traders.

Today’s buy-side trader has more choice than ever on how, where and whether to trade in size, explain report co-authors Sayena Mostowfi, a TABB principal and head of equities research, and research analyst Valerie Bogard, in the report. However, trading at an acceptable price in size still requires the buy-side trader to juggle trading experience, portfolio manager demands, volatile markets, and the many different models and trading venues offering both visible and hidden liquidity. 

“Variety abounds for buy-side traders between the different business models, broker algorithms and actionable indications of interest (AIOI) lighting up on their screens,” said Mostowfi.  ”New trading models, connections, products and systems are constantly widening the spectrum of block trading possibilities. Unfortunately, this steady evolution has also inflated concerns about jeopardizing unfinished flow, being second guessed or even missing a trade.”

TABB explains that alongside the ever-expanding choice of execution strategies, the tools that buy-side traders use must simultaneously adapt with the market. Of the 100 U.S. buy-side head traders TABB interviewed for the study, 46% have had a change or upgrade to their EMS or OMS within the last 12 months.

“Good visibility and fast access to liquidity are crucial elements of block trading, putting OMS and EMS vendors under tremendous pressure to evolve their systems and meet the changing market needs,” said Bogard. 

Part one of the series, “US Institutional Equity Trading 2016: Part 1 of 3 Buy Side Emancipation or Purgatory,” focused on the unprecedented drive by buy-side firms to implement new technology as they face heightened regulatory scrutiny. The final report will analyze buy-side firms’ top brokers in terms of commissions, execution quality trends and areas for market structure improvement in the new era of full disclosure.

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