​​Asset managers reward companies that embrace automation – isn’t it about time that they do the same?

A conversation with Daniel Shepherd, CEO of BTON Financials about outsourced trading in a post Covid-19 world.

Change:

Obviously, no one saw Covid-19 coming. It has had a dramatic impact with regards to the way we work, personal lives, organisational structure, and client relationships. However, markets, companies and technology adapt, change, and evolve. As we have seen in the past during volatile times, the world eventually returns to normality. It is my opinion that significant changes and dramatic events tend to accelerate trends in the markets. We are seeing this now. More than ever.

Trends:

BTON Financials offers asset manager the option to outsource the trading function. I believe this will drive performance and the quality of execution. The world, pre-Covid 19, has changed and continues to do so. It is more complex with regards to asset coverage, market structures, regulatory requirements, access to liquidity, new technology etc. The long and the short of it: the buy-side trading desk is under pressure to become more efficient, automated, scalable, and to reduce cost.

The asset management industry is rethinking trading. The cost of operating an internal dealing desk is significant, especially after recent changes and regulatory pressure in a post-MiFID II and SM&CR world. The industry asked for a change – even before Covid-19.

State of Play:

A counterargument to outsourced trading is to have portfolio managers and traders in the same room, accessing and sharing market information and intel. The reality of the world we live in is that – currently – it is not an option. There are 70.000 people working in Canary Wharf. C-level protagonists are returning to work, but several companies will have employees working from home for the foreseeable future.

As always, the devil is in the detail. There are legal and regulatory requirement, practicalities, and client agreements. The challenges, however, remain the same: legacy system and inadequate technology limiting business excellence and growth.

The Future:

The future is data- and technology driven. Legacy systems and poor market access will no longer be accepted by the industry.

When the dust settles, cost pressure will be on top of the agenda. Automation, access to data, liquidity, markets, and brokers will drive performance. And, change the way leading asset managers work, grow, and develop.
Asset managers have rewarded companies who have embraced innovation and automation. It is time for the buy-side industry to do the same.

Thomas Eikrem, Head of Consulting - SimCorp Skillfinder International, TEikrem@Skillfindergroup.com

Daniel Shepherd, CEO, BTON Financials, daniel.shepherd@btonfinancial.com