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87% of Broker-Dealers Voice the Growing Importance of Execution Consulting Over Algorithms and Liquidity Management
New Study by Aite Group finds that clients expect their broker-dealers to provide value-added advisory on trading analysis and timely support on electronic executions
NEW YORK, NY (USA) — June 19, 2012 — A report conducted by independent research and advisory firm Aite Group finds that 87% of broker-dealers surveyed believe that the importance of “execution consulting services” (ECS) has now exceeded the provision of core liquidity management services and algorithmic trading as their top differentiator. The study defined “The Next Generation of Execution Consulting Services” as a new service level that buy-side firms are increasingly demanding from broker-dealers.
The traditional interface between broker-dealers and buy-side clients has been a reactive customer support function. However, with the rapid adoption of electronic trading and increased market uncertainty, Aite Group concludes that today execution consulting services teams must provide far greater value and insights for buy-side clients with new “high-touch” customer services.
Aite Group identifies and defines three key elements of the next generation execution consulting services in this study:
- High-touch advisory services that helps clients understand market conditions and optimize their electronic trade execution
- The provision of transparent analysis of trade execution quality, risk, and transaction cost
- Innovative real-time execution consulting tools that provide live insights, in addition to historical reports
Key findings from the study include:
- 87% of respondents express that ECS is the most important competitive differentiator for broker-dealers.
- The majority of respondents report that their current service levels are unacceptable. Many have a 3-5 day turnaround time to buy-side inquiries; the majority of respondents expect near real-time support and responses.
- 79% of respondents believe that active alerting is the most important service of ECS functionality. More than half the respondents identified the other key elements of ECS as: pre-trade and post-trade analysis, a single view of client data, and real-time trade analysis.
- Regulatory changes and the growing demand for transparency have imposed considerable requirements on sell-side firms, leading to expectations of real time risk management, reporting and surveillance.
“The main challenge for tier 1 and tier 2 brokers is that the decentralized trading infrastructure creates complexity and latency for firms seeking to identify and address issues during the lifecycle of a trade,” said Sang Lee, Managing Partner at Aite Group. “Many brokers have dozens of systems connected to various liquidity venues, data sources and databases. The key to building a scalable and sustainable execution consulting service is to effectively integrate these systems and deliver customized and relevant information to sales traders, quants, risk managers and analysts in real-time.”
“The fact that execution consulting services has now eclipsed the importance of broker-supplied algorithms is remarkable,” said Mark Palmer, CEO at StreamBase, “With automated trading levels at an all-time high, broker-dealers now must differentiate themselves based on the real-time insight they can provide buy-side clients. This is a new way of thinking for many firms, and ECS groups will demand a new kind of real-time analytics platform as a result.”
Aite Group’s study was conducted during March and April 2012 and involved a qualitative analysis of 15 leading broker-dealers. An early-access version of the report is available by registering on the StreamBase website http://goo.gl/CKzqk.
Sang Lee of Aite Group will lead a roundtable discussion on next generation execution consulting services, registration is available at http://goo.gl/5P80N.
StreamBase provides solutions for real-time analytics. StreamBase’s products include StreamBase LiveView™ and StreamBase CEP, in addition to connectivity to over 150 data sources and an ultra-low latency FIX engine.
StreamBase CEP enables the rapid development and deployment of real-time analytical applications, with pre-built integration for streaming and historical data, visualization engines and statistical tools. StreamBase LiveView is a push-based real-time analytics solution that enables business users to analyze, anticipate and alert on important business events in real-time, and act on opportunities or threats as they occur.
StreamBase customers include CME Group, Thomson Reuters, SunGard, BM&FBOVESPA, ConvergEx Group, RBC Capital Markets, CMC Markets, Gain Capital, City Index, Linden Lab, Orbitz and BlueCrest Capital Management. The company is headquartered in Lexington, Massachusetts with offices in New York and London. In 2010, the World Economic Forum awarded StreamBase the title of Technology Pioneer. For more information visit www.streambase.com.