Navigating Sell-Side Trading in 2023 – How to Intelligently Optimise for Growth

June 6, 2023 | By: Iain Smith

By Rajiv Shah, Head of Sales, Sell-Side Solutions, EMEA – FlexTrade Systems

Spring is always a time I eagerly anticipate. It brings a raft of large-scale conferences, including WBR’s TradeTech Europe, FIX EMEA, and more specialised events such as the Broker Club’s annual summit. Moreover, as a vendor, it’s a fascinating period in the calendar as it gathers the buy-and-sell-side trading community to discuss the industry’s most prominent challenges and, crucially, ideate the optimal operations and technology solutions to tackle them. So, as the dust settles on a very busy start to the year, what were some of the key learnings from our conversations with clients, prospects and partners across the sell side? 

Enabling Change to Meet Today’s Challenges  

More so than ever, the common consensus from our conversations with clients, prospects, and partners has been abundantly clear this year – the Sell-Side is laser-focused on change. From innovating efficiently around idea generation, insulating against cost to protect margins, to providing a superior client experience that can differentiate, the sell-side must be ready to optimise to meet many new and existing challenges.

Firms are tackling these challenges by looking toward flexible, best-of-breed operational models and new, evolving skill sets. Also, they are underpinning both with robust, functionally rich “full-service” technology platforms to allow them to optimise, automate, and innovate. But what specific areas are crucial for the sell-side, and how can meaningful change be delivered?

Openness and Flexibility are Crucial

From my experience and based on the conversations we’ve been having, firms are looking to address these challenges in a few distinct ways. Firstly, mandating an OMS partner that delivers an open architecture and flexibility through rich APIs is crucial. With an API-first approach, downstream middle and back-office systems can seamlessly integrate into the OMS, simplifying systems architecture and improving straight-through processing. It also has to deliver an advanced, scalable foundation to accommodate ever-changing client needs while allowing room to integrate their “special sauce” into the mix and build innovative ideas – at speed – around the core product.

Secondly, in an era of compressed margins and focus on cost reduction, the ability to consolidate flows across high and low-touch and asset classes is a key requirement for front-office transformation initiatives. A single, scalable multi-asset OMS where your trading teams can benefit from a common set of tools, workflow, and automation capabilities.

Further, with thin commission rates, sell-side desks must counteract this through increased volumes to maintain revenue levels. To do so effectively, they are looking for solutions with sophisticated yet flexible automation tools to handle increased order flow without the need for major reconfiguration or manual intervention. These tools should also allow the end user to “self-serve” and create their specific automation without recourse to IT or the vendor. Not only can this approach enable firms to operate efficiently at scale, but by democratising the ability to build automation to the trading teams directly, it can enhance the user experience and improve the agility and speed in which individuals can react to change or opportunity.

The Convergence of Buy-and-Sell-Side Technology

Finally, a key theme from our conversations is that we are witnessing a convergence between the trading technology needs of buy-and-sell-side trading desks. Today, sell-side trading teams are benefiting from functionality, which has traditionally been the preserve of buy-side trading desks, to optimise workflow and reduce operational friction. It makes sense. Working with a technology partner who can demonstrate strong domain expertise and understands, develops, and offers solutions for both sides of the equation can provide unique access to extensive execution capabilities and a broader set of tools and innovation for the sell-side to leverage.

For instance, FlexTrade’s Algo Wheel, originally developed to help buy-side dealing automate and manage orders across executing broker algos, has gained traction across our sell-side clients. Picking up on the broker execution challenges described to us by many sell-side firms, we recognised an adaptation of FlexTrade’s Algo Wheel, originally developed to help buy-side dealing automate and manage orders across executing broker algos could also help the sell-side to automated low-touch broker algo flow.

Other examples include utilising specific functions such as internal crossing or consuming data sources such as 3rd party analytics, which can optimise how the sell-side interacts with its clients and enable them to provide new, specialised, differentiating services and capabilities. The key to offering this from a vendor perspective is leveraging a shared underlying infrastructure, shared domain expertise, and a consistent approach to technology and development.

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