Change is nothing new in trading. Since the millennium, sell-side brokers have had to ride waves of transformation in regulation, market structure, technology and economic fundamentals. Survival and success have depended on adaptability and timely adjustment to these increasingly complex market circumstances in terms of organization, business models and technology.
The financial crisis of 2008 served to further exacerbate the situation, bringing about strong pressure to slash budgets and headcounts, which in turn strengthened the impetus to move towards automated, electronic trade execution. More specifically, this has meant an increased focus on 'flow products' like exchange-traded cash equities and derivatives, and the provision of direct market access (DMA) and direct strategy access (DSA) – algorithmic trading – to cut costs. The rise of 'Low touch' trading desks offering DMA/DSA have consequently emerged like start-ups inside institutions and have gradually captured the lion’s share of order flow and market growth, alongside the more traditional 'High touch' desks.
In terms of technology, this prompted Tier 1 institutions built their own automated systems for low touch trading, including connectivity and order management, while Tier 2 firms were forced to bend existing high touch Order Management Systems (OMSs) for low touch flow in an effort to meet demands while constraining costs. But given the very different nature of high touch and low touch trading, neither approach is fit for purpose in a world where the electronification of asset classes and volume is only picking up pace.
This white paper takes an in-depth look at the evolution of low touch trading and its implications for order management technology, exploring the need for fit-for-purpose solutions that provide clients with the quality service that they demand - now and in the future.