November 2, 2023 | Stamford, CT — Equity traders are increasingly open to the idea of enlisting an outsourced trading provider to supplement their internal trading desks in international markets.
Roughly 30% of the buy-side equity traders in the U.S., Europe and the U.K. taking part in a new study from Coalition Greenwich, in partnership with LSEG, expect their firms to consider adding an outsourced provider for cross-border trading in the next two years. This level of interest reflects a major change in attitude: As recently as 2020, only 5% of equity traders said they would be open to using an outsourced trading platform. What changed? In a word, technology.
“By now, almost everyone understands that success in equity market trading will require a combination of human skill and technology,” says Jesse Forster, Senior Analyst at Coalition Greenwich Market Structure & Technology and author of Cross-Regional Equity Trading: Outsourcing for Outperformance. “Today’s new breed of fintech-based outsourced trading platforms offers access to an intriguing mix of advanced technology, market expertise and seamless integration with internal systems.”
Addressing Pain Points in Cross-Border Trading
A blend of talent and tech is especially valuable in cross-border trading, which poses particular challenges in execution quality, local market knowledge and operational efficiency—including the need to coordinate trading coverage, middle-office, back-office and settlement activities across time zones and regulatory jurisdictions.
Two-thirds of equity traders believe outsourced trading desks can improve access to liquidity in international markets and believe that adding outsourced trading capabilities can enhance execution quality and trade performance. Between a quarter and a third of study participants think supplementing internal capabilities with outsourced trading will help their organizations access new markets and asset classes, obtain better color on international markets, and customize workflows and strategies.
“Equity market participants are recognizing the potential for technologically adept providers, with highly skilled traders placed in local markets, to enhance their own capabilities in cross-border trading,” says Jesse Forster.
Cross-Regional Equity Trading: Outsourcing for Outperformance examines the potential for outsourced trading platforms to help address the complex challenges faced by asset managers in cross-regional equity trading. The report explores the key attributes asset managers seek in trading partners and highlights how a new breed of market participants is redefining equity trading, emphasizing the need for an effective blend of advanced technology and market expertise.