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FLASHBACK FRIDAY: One Touch is the Future

Flashback Friday sponsored by Instinet

Traders Magazine Online News, April 13, 2018

John D'Antona Jr.

Once upon a time any broker-dealer had two equities trading desks – one low-touch and one high-touch.

And these two trading desks formed the nexus of the trading desk and customer orders. The high-touch desk employed human sales traders who personally handled orders via telephone and provided market color and commentary. The low-touch desk usually saw to it that orders were placed in an algorithm and computer logic handled the executions. The financial and managerial support of these two distinct yet related desks was easy when equity commissions were high. But then came the inevitable and cyclical contraction of commissions and brokers had to cut costs.

Amid this cost cutting was the rise of technology. So, as sales trader jobs went away as a result of cost cutting brokers simultaneously increased their technology spend. Why employ three sales traders when one smart order router could do the same job – without needing raises, benefits or vacations?

But the buy-side wasn’t ready to say goodbye to the people who had long picked up their phone calls, those that assisted them in finding liquidity, personally knew where stocks could be found and in some cases, would just discuss the prior night’s sporting event. Machines were OK for some orders but not all.  The buy-side still wanted a human body on the other end of the phone when they called.

So, what’s a broker to do?

Some of the larger bulge firms began to float the “one-touch” concept – a hybrid combination of both low-and high-touch sales traders sitting together on a single desk. This desk, composed of newly minted “execution consultants,” would serve as the single touch point for the buy-side. This would allow brokers to retrain traders in a unified manner and retain their best talent.

Fast forward to now and not many mention “one touch” – after a large culling of the talent pool brokers big and small have again been referring to their sales traders or desks as either low- or high-touch.

So, what happened?

Richard Johnson, Greenwich Associates

As Richard Johnson, Vice President in Greenwich Associates Market Structure and Technology group recalls it, one-touch was never intended to fully replace the two silo (touch) trading desk. One touch, as he understood it, would be available based on client needs.

“The larger accounts on the street will never choose low-touch as their needs are much more expansive,” Johnson said. “Smaller, less profitable accounts, may be more open to one-touch coverage as they recognize they can’t expect the same level of service.”

But what about now? Is there still room for both the high- and low-touch trading desks?

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