18 June 2008
TABB Group reports- The Sell-Side Must Adopt Cross-Asset Trading
-Research examines the current market forces driving firms’ technology spend
-Report available through Quod Financial
London and New York, June 18th 2007 - Aggressive trading desks must employ cross-asset
trading systems in order to stay ahead of the game. This is according to the recent report
published by TABB Group, ‘Cross-Asset Trading Systems: Controlling the Trader’s Desktop’.
Andy Nybo, author of the report, says that traders on both the buy- and sell-sides need
trading systems that can manage the increasing complexity of the global financial markets. To
manage cash equities, fixed income, derivatives and currencies, they will need systems that
can handle multiple asset classes.
Commenting on TABB Group’s emphasis on the challenges to the buy-side, Ali Pichvai,
managing director of Quod Financial, the 3rd generation cross-asset trading and order
management system provider indicates that the true challenge lies with the sell-side. “The
sell-side is far behind the buy-side in its adoption of cross-asset trading. The failure to
address their clients’ demands will only push the buy-side to further disenfranchise the sellside,”
comments Pichvai, “as liquidity fragments and becomes global, and trading increases in
complexity and becomes cross-asset in nature, banks are under increasing pressure to
provide new cross-asset global trading services to their buy-side clients. The first mover
advantage is immense, which will leave the laggards out of the game.”
Quod Financial will be distributing this very timely TABB report in order to raise the issues the
company has been discussing for a long time. Quod Financial believes the delay in the sellside
adopting cross-asset trading is due to a number of factors:
- The current organisations, culture, knowledge and technology are the result of monoasset
trading. Implementing cross-asset trading requires a momentous shift in
perspective which, in contrast to the day-to-day investment decisions, becomes the
remit of the most senior managements’ decision making process.
- More fundamentally, some sell-side institutions have embarked themselves on
becoming liquidity pools, which makes them compete directly with exchanges and
other liquidity venues. This has consumed a lot of their effort, meanwhile the crossasset
trading revolution is quietly gaining momentum.
- In some asset classes, efficient electronic trading and increased transparency can
reduce spreads and margins, which will inevitably affect banks’ profits.
Mickael Rouillere, Chief Technology Officer, Quod Financial adds, “the current nature of sellside
trading systems remains single-asset class, with separate pre-trade risk, trading and
execution systems and infrastructure, post-trade reporting and analytics. This harms their
position greatly, creating unnecessary costs which trickle down to their clients, and instituting
a loose product-driven instead of client-driven relationship. This is the missed opportunity.”
“With MiFID and Reg. NMS providing the first cross-asset regulatory frameworks, the
fragmentation of liquidity, and the need to prove ‘best execution’, the financial markets are on
the cusp of a change akin to the Big Bang. More so than ever, it is the tools that will
distinguish the winners from the losers. Ignoring just one of these trends is not an option,”
concludes Pichvai.