The road to best execution is littered with failed technology projects. At TradeTech in Paris, buy-side traders and front office technology vendors gave advice on how to shortcut that route through successful best practices.
Matthew McLoughlin, head of trading and partner at Liontrust, “It comes down to being efficient in taking in as much information as possible and finding actionable insights quickly without having to scroll through pages of data.”
Stuart Lawrence, the head of UK equity trading at UBS Asset Management noted, “One of the biggest responsibilities of all buy-side trading desks is to minimise the implicit costs of the implementation of trading, and that usually means we focus on where we can add the most value; orders with the highest notional value. Under that principal we should automate as many of the orders as we can where we can add no value. But we do not automate for automation sake. We should not have an arbitrary number, for example trying to automate 60-70% of all of our flow.”
For technology vendors seeking to help traders in achieving these goals, the situation is complicated by the multiplicity of new developments that can muddy the water for tech providers as they seek to develop new features.
Robert Watts head of equity business development for trading solutions, at FactSet, said, “We are often approached by third parties innovating, bringing new features to market and we revert to the buy side to see if it makes a difference to their ability to execute trades. So, we have to be discerning on that basis and use of resources. The buy side could be overwhelmed with data sources, with venues and market participants offering data solutions and they all want them in the execution management system (EMS) in front of the trader.”
It is also incumbent upon vendors to know their strengths and limits. Matt Barrett CEO of Adaptive Financial Consulting, said his firm was only interested in engaging with clients in ways that could help the client to differentiate their own business. That stands in marked contrast to pitching for every piece of business.
“You need to figure out where you really stand out in the market and where you want to stand out,” he said. “We are really for people who value differentiation over technology. We build bespoke solutions for clients, and building something is never cheaper by definition than buying or licencing something, and we would always avoid situations where we are being put up against a landscape of vendors.”
It is also important to understand the extent to which a system can be adjusted to support a client’s goals – and whether that means changing the system itself, a decision which might lead to a change that has to be supported into the future.
Vidya Guruju, director of product management at Charles River Development, a State Street Company, said, “I would like to draw the differentiation between customisation and configuration. There are certain levers you can set in a certain way to get the optimal configuration. If your system has an open architecture and you are plugging in services from an external provider, you are really using the native functionality of systems. If clients want us to be the core platform to which they can plug in other services, they do not necessarily consider it to be customisation.”
As a sense-check, Garret Ward, CEO, Numis Europe, noted that outcome for an order needs to be the primary arbiter of effectiveness.
“There is an element where if a trade is going to wind up in a high-touch solutions, and this happens again and again, then maybe pivot a bit in how your workflow happens, and certainly to avoid automation strategies that wind up at the end of the order with a bad outcome,” he said.
