The mood at this week’s TradeTech USA conference was cautiously optimistic this year, as attendees are adjusting to the lower volume and reduced commission environment.
Andrew Silverman, global co-head of electronic trading at Morgan Stanley, said that while trading volumes were up slightly in January versus his firm’s projections, the crisis of confidence shown by investors brought on by the May 6 "flash crash" still remains.
He cited internal trade volume data that showed actual trading flows were below projections for the last six months of 2010. The handwriting is on the wall: Until investor confidence is fully restored, volumes would remain low and commissions depressed, he said, adding that self-regulation by the Street was the way to restore that confidence.
"We can either regulate ourselves or we are going to be regulated," Silverman said. "One of five or one of eight of us here today [Wednesday] will not be here next year if we don’t regulate ourselves." And the former was much more preferable than the latter, he added.
Despite this warning to attendees, the buyside and sellside were content to eat, drink and almost be merry as they mingled along the majestic Hudson River. To be sure, it was a business meeting, though Bloody Marys and Mimosas were served on silver trays on Tuesday morning. Still, there were few takers. This year’s three-day conference was held at Pier 60, Chelsea Piers, in New York. Last year it was held at the Marriot Marquis Times Square, New York.
This year’s TradeTech conference attendance saw a modest 8 percent bump in the number of institutional and buyside participants, while the overall number of people wasn’t much different than last year, according to organizers. A total of 257 buyside participants came to the event this past week, compared with 235 in 2010. Overall attendance figures were virtually unchanged, with 703 people at the confab, versus 707 last year.
On the vendor front, 45 different firms were represented at this year’s meet, unchanged from last year.
One technology vendor likened the mood and participation of the buyside at the conference to that of window shoppers–the buyside was looking at the new products, but not making any firm commitment to purchase software or other products.
"I’m here to take a look at some of the new offerings, but I have no money to spend," said Carl Reynolds, global systems strategist at Pioneer Investments.
A sellside vendor who requested anonymity said this type of behavior was typical at this year’s event. He, too, recalled instances where buysiders inquired about his firm’s technology and products but confessed to having no budget to spend.
"It’s a buyer’s market," he said. "Everybody’s looking, but no one’s buying. Also, firms are extending their try-out periods as long as they can. It’s a bad environment for vendors."
Still, the buyside had plenty to say to the sellside at the conference. Several instant polls were taken and here are the results:
One question asked what services the buyside wanted the most from the sellside–43 percent said they wanted access to block liquidity. At the same time, 35 percent wanted electronic access to markets and 18 percent wanted color from the broker’s desk.
Attendees were asked to forecast where commissions were headed this year–43 percent said rates would be stable, 33 percent said slightly lower and 15 percent responded simply lower. In addition, 8 percent expect an increase–5 percent said commissions would move up slightly and 3 percent said they’d move higher.
When it came to understanding their brokers’ algorithms or dark pool strategy, 56 percent of attendees said they knew how the software worked, while 46 percent said they did not.
And when it came to the number of algorithms on their desktops, 53 percent of survey respondents said they had less than 25 to choose from, while 20 percent had between 25 and 50 algos at their disposal. Another 15 percent said between 50 to 100 algorithms were on their screens, and 12 percent said they had more than 100.
Regarding the number of algorithms they actually use, 89 percent of conference attendees said they use less than 25 algorithmic providers and 8 percent trade with between 25 and 50 providers.
In terms of what sellside services the buyside valued the most, 60 percent said finding liquidity was the most important, while 24 percent listed execution performance as the most valuable solution. Another 6 percent of respondents listed both the brokers’ ability to keep their intentions anonymous and the fees brokers charge as important, and 4 percent said overall service was most valued.
When asked what factor determines which broker the buyside sends an order to, 55 percent said a brokers’ access to dark pools and crossing networks was most important, while 20 percent listed liquidity discovery as the main tenet. Another 15 percent said the research a broker has access was the key determinant to who gets an order, and 5 percent said overall quality of service.
Giri Cherukuri, head trader and portfolio manager at Oakbrook Investments, said during one panel that he expects best execution from his brokers. He added that, despite having discretion in working his orders, brokers cannot be mind readers.
"In the end, the onus is on the buyside to communicate, be painfully clear, on how we want brokers to execute our orders," Cherukuri said.