The death of voice broking or high-touch trading isn’t going to happen any time soon.
While electronic trading and algorithms have revolutionized the equities market and trading, as well as thinned the ranks of high-touch sales traders, these telephony-based traders still have value – a lot of value. That’s the findings of a new report from Greenwich Associates.
According to Greenwich Associates data, over 55 percent of buyside U.S. equity trading volume is still executed via telephony, despite growth in so-called “self-service” execution tools or algorithms. Based on that percentage, equity brokers are pricing traditional “high touch” trades as a premium service-and investors are proving themselves more than willing to pay.
According to a new report from Greenwich Associates, “Sales Trader of the Future,” institutional investors are paying for more than just access to a sales trader capable of getting an order done. In return for their commission payments, buyside institutions are seeking advice from a professional who understands how the market works and the external factors that might influence a client’s decision-making progress.
In other words, the buyside wants market color and is willing to pay for it.
“While being an expert in macroeconomics, market structure and individual sectors is not a requirement, being able to carry on an intelligent conversation on these topics is a must,” sais Kevin McPartland, head of research for market structure and technology at Greenwich Associates. “Just knowing your clients kids’ names and having Yankees tickets isn’t enough anymore.”
Greenwich Associates interviewed 316 buyside U.S. equity traders and 225 U.S. equity portfolio managers regarding U.S. equities. Respondents answered a series of qualitative and quantitative questions about the brokers they use in the U.S. cash equity space. These data were combined with results from telephone interviews conducted by Greenwich Associates in April 2014 with 19 professionals at sell-side firms to understand how the sell-side sales trader and sales desk are evolving in the current market. Respondents were asked about the size and composition of the desk, the impacts of regulations, and how the role of the sales trader has changed.
The results of this research report show that a smarter, client-focused sales-trading force, coupled with uncertain markets and a complex market structure, prompts buyside clients to pick-up the phone and trade. Despite this persistent demand for sales trader advice, more than 40% of broker-dealers are reducing sales trading headcount.
Despite the proliferation of self-directed electronic trading, the report said that the buyside still relies on sellside expertise and execution consulting services – the high-touch traders. Going forward, the role of the sales trader will be much less as an order-taker and much more as an advocate who can guide an investor through the complexity that is today’s equity market, McPartland said.
