A survey of 100 industry professionals reveal what the Buy Side is focusing on in 2017 and beyond.
WHAT ARE YOUR BIGGEST CHALLENGES IN 2016/17?
“In an environment of low returns, firms are under pressure to ensure they are properly equipped to maintain competitive advantage and find liquidity in a fragmented landscape. It’s not surprising that accurate risk analysis, pricing and valuation and navigating the fragmented landscape come out as two of the top challenges for firms. 44% of respondents cite regulatory compliance as a key challenge and with Mifid II reformation, and collateral pressures looming, remaining compliant is a necessary but burdensome cost.”
WHAT ARE THE BIGGEST PRIORITIES FOR YOUR EQUITIES TRADING DESK IN 2016/17?
“This is supported and closely linked to the second and third most pressing priorities: streamlining across asset classes, and finding alternative methods to source liquidity. Building an agile, scalable and streamlined equity trading desk is vital investment for the buy side, and absolutely necessary to be able to thrive in a complicated landscape.”
ARE WE LIKELY TO SEE VENUE CONSOLIDATION OR WILL LIQUIDITY REMAIN FRAGMENTED?
“65% of traders believe that exchanges and platforms will consolidate, with 25% saying that the consolidation has already begun. Navigating the fragmented landscape comes out as a key challenge for traders this year, so consolidation may well be a welcome development. The next five years will be incredibly important for both the development of market infrastructure, and the tactics the buy side use to navigate this landscape and find liquidity.”
HOW CONCERNED ARE YOU ABOUT INFORMATION LEAKAGE WHEN A BROKER IS CALLED?
“67% of traders remain concerned about the potential for information leakage. Measures are being taken by platforms and exchanges to protect the buy side from adverse players, with IEX and their controversial speed bump now approved by the SEC, and measures taken by Nasdaq to remain competitive, it will be interesting to see how brokers respond and whether this becomes more or less of a concern over the next year.”
WHEN DECIDING WHICH BROKER TO WORK WITH, WHAT IS THE MOST IMPORTANT CRITERION?
“In an increasingly regulated market, where trading activities are under scrutiny and commission models are changing, it is really no surprise that cost effectiveness and risk management came out on top. The importance the buy side place on cost effectiveness correlates with the increasing pressure on brokers to provide a quality service at a low price, and the subsequent declining price of commissions in the market. As many buy side firms look to capitalize on unbundled services, it will be interesting to see how brokers evaluate the cost of their research and execution.”
WHAT’S THE BEST WAY TO FIND LIQUIDITY?
“Traders across North America believe algos and customized metrics are the best way to finding liquidity – increased trading in dark pools comes a close second.”
ON THE BANK OF MARKET STRUCTURE DEVELOPMENTS, WHO DO YOU BELIEVE HAS ENDED UP WITH MORE CONTROL OF LIQUIDITY IN EQUITIES MARKETS?
“The consensus is that asset managers and hedge funds have ended up with more control of liquidity closely followed by market makers.”
HOW LIKELY IS IT THAT GLOBAL MARKETS WILL BECOME FULLY UNBUNDLED IN THE NEXT FIVE YEARS?
“93% of traders are somewhat confident that global markets will become fully unbundled in the next five years following the trend of complying with the most conservative regulation, with only 7% thinking this is unlikely.”
HOW ARE YOU PLANNING TO SPEND YOUR TECH BUDGET 2016/17?
“80% of buy side traders are looking to invest heavily in data analytics in the next 12 months – this is perhaps unsurprising as traders continue on their quest for more information and transparency around their execution. Evidently the buy side will want to take advantage of the developments in pre and post trade, as well as real-time analytics.”