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Algo Wheels and Analytics – Are the Sell Side Meeting the Buy Side's Needs?

Traders Magazine Online News, June 12, 2018

Chris Monnery

Following on from my last article – Low Touch Trading – The Transition from Algos to Service, I had the chance to reflect on another area covered at the recent FIX Conference. During my panel on the changing needs of the Buy Side from the OMS/EMS perspective, we polled the audience to see if the Buy and Sell Side aligned regarding technology priorities.

Question: What is the Buy Side's top technology priority with respect to their order flow.

As you can see, the results indicated a considerable disconnect between both side's focus, and what followed was a great conversation drilling into these differences. 

We started with Post Trade process automation.  While this was seen as the least important option from the Sell Side point of view, the panel's take is that this was, or should be, almost fully priced in by both sides.  Post Trade Processing has been a primary area of focus over the past few years and has seen the efficiencies and standards adopted by Equities and FX, creating significant savings in Listed Derivatives and Fixed Income.

When you consider the stance of those people responding, you need to look at both their person's asset coverage and pain, which may be why nearly one third of the Buy Side polled this as their top priority.

Next up, Real Time Analytics, which was polled as the highest priority by the Buy Side. While this is a broad topic that could cover everything from TCA to Venue Analysis, the Buy Side participants on this panel focused  this as providing in-flight order analytics related to orders performance (e.g. slippage vs benchmark or projected completion), and metrics used in house by the Sell Side (e.g. expected volume for the remainder of the day).  These are both tools that the Sell Side have, and use to manage their client's order flow, but it seems they're underestimating the value that sharing this information would give the Buy Side.  It's unclear exactly how this information could be trafficked between both sides, what the unintended consequences may be (market data fees anyone?), or even where this could eventually end up (perhaps a Buy Side trader engaging with a bot over chat to get updates on their orders). But one thing was clear, the Sell Side need to recognize this hunger for data from their clients and define how to provide it.

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