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High Touch Algos

Traders Magazine Online News, March 29, 2019

Michael Mollemans

Acting in the best interests of clients requires expanded trade process automation and a renewed focus on providing “high touch,” low cost customized service partnerships.

Markets in Financial Instruments Directive (MiFID II) regulation and best execution reporting requirements necessitate increased use of automation and algorithms (algos). However, the traditional “low touch” service approach is no longer an option when the goal is to achieve the highest possible ranking on a client’s execution performance scorecard. Automation and investment in trade process technology create efficiencies that support the sell-side’s efforts to provide clients with “high touch” services at “low touch” rates, together with all the block liquidity access, service guarantees and analytics clients expect from their customized service partnerships.

Trade process automation starts with the order and execution management system (OEMS).
A robust application with the ability to process large amounts of order and execution data across global markets with speed and efficiency is no longer enough.

Increasingly, sell-side OEMS systems are being assigned tasks that were previously done manually by sales traders. Performance monitoring and alert functionalities are continually being built into OEMS applications to automate streamlined procedures in an effort to help sales traders stay ahead of the curve with proactive status updates and client notifications relating to suspicious order or execution messages. The OEMS build-out is a reflection of a firm’s attention to detail and is a testament to the collaborative efforts between the sales trading team and the product development team.

Block liquidity access is often cited by the buy-side as one of the main qualitative factors considered when making broker routing decisions. Automation in the indication of interest (IOI) communication process replaces the traditional manual approach to accessing block cross opportunities and prevents information leakage by hard-coding client specific restrictions and preferences. Sales traders using “smart IOI” applications can instantly batch process hundreds of lines in the OEMS and create special alerts for buy-side traders on the IOIs that match their stock holdings lists, or interest lists. The efficiencies gained through the continual build-out of sales trading functions into processes and applications allows sales traders to spend more time providing value-added “high touch” services.

Settlement efficiency is weighted highly among the qualitative factors included in client execution performance scorecards. Streamlined and automated end-to-end workflow processes straight from the OEMS to the middle- and back-office applications is what makes it possible to process trades over global markets quickly and efficiently. Shared systems and cross-coverage between Asia, EMEA and Americas teams allows clients to experience truly uninterrupted 24-hour support and updates on orders and settlement processes, with the end goal being the delivery of a consistently reliable trade and settlement experience.

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