Forefront Communications

TradingTech Insight: Cutting Through the Noise: How to Identify True Outsourced Trading

Sam Belden

Sam Belden

By Andrew Walton, Head of European Business at Tourmaline Partners.

More than 18 months into the era of MiFID II, it is now clear how this key piece of European regulation has fundamentally changed the business models of both brokers and investment firms. Buy-side firms in particular are required to have greater systems and controls around most aspects of their core business, including pre-and post-trade transparency, best execution, costs and charges and regulatory reporting.

It should therefore be of little surprise that many asset managers, actively looking for solutions to help ease their regulatory burdens, are evaluating what they should be doing themselves versus what they could potentially outsource. In response, we have seen a marked rise in the number and variety of ‘outsourced trading providers’ entering the market over the past year, with a recent report produced by Opimas focusing on comparing and evaluating the very different services offered by no fewer than 19 outsourcing providers, fifteen of which have operations in Europe.

While this presents the investment management community with a greater degree of choice, the growing number of providers claiming to offer some version of outsourced trading is also creating additional noise and confusion. The result? Despite a marked increase of interest in outsourced trading due to the tangible benefits it can offer, the lack of clarity around the services actually being provided is resulting in continued inertia on the part of the buy side in Europe.

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