Buy Side Cross-Asset Trading Technology: Putting the Pieces Together

by Brad Bailey, January 26, 2017
Industry Trends
Global

Abstract

The buy side is remapping their trading desks in order to leverage the growing similarities in market structure across equities, options, derivatives, fixed income, and FX.

Celent has released a new report titled Buy Side Cross-Asset Trading Technology: Putting the Pieces Together. The report was written by Brad Bailey, a Research Director with Celent’s Securities & Investments practice.

In this report, Celent looks at the forces driving the buy side to “desilo” trading desks to maximize effectiveness across asset classes. The buy side is remapping their trading desks in order to leverage the growing similarities in market structure across equities, options, derivatives, fixed income, and foreign exchange.

Increasing assets, massive volatility, converging market structures, and a complicated regulatory environment, all combined with a remapping of engagement with their sell side partners, are driving buy side firms to become more self-sufficient in their trading and executions across asset classes.

The key challenge for most buy side firms is building trading and execution desks that can leverage both technology and expertise across asset classes to maximize the products they can effectively trade. They are looking to create powerful analytic tools, trading cost analysis, and other methods to determine best execution as well as true trading costs. There is demand for technology solutions that can be leveraged across asset classes but still offer nuanced ability in a given asset class.

The buy side is taking many lessons from the process that evolved in the electronification of equities, and bringing those lessons to other asset classes to create unified workflows that maximize automation and minimize redundancy.

“The buy side is looking to automate the easy flow in equities, ETFs, options, futures, FX, and fixed income so they can focus on the challenging trades that require human guidance and expertise,” commented Bailey.

“Changes in technology, market structure, and regulation are occurring so fast that firms need robust solutions to engage multiple types of liquidity as well as strong middle and back office functionality. Most firms want the best-of-breed technology for their liquidity sourcing and execution, but they also want one back office,” he added.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Introduction

2

 

Evolution of the Buy Side Front Office

3

 

Key Forces

3

 

Cross-Asset Trading Technology Themes

6

 

FX

11

 

Fixed Income

12

 

Derivatives

13

 

Cash Equity

14

Conclusion

15

 

Evolution of the Buy Side Execution Desk

15

Leveraging Celent’s Expertise

16

 

Support for Financial Institutions

16

 

Support for Vendors

16

Related Celent Research

17

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