A new Greenwich Associates report, Blurred Lines: Sales Traders Drift Toward Execution Consultancy, shows that a majority of the more than 300 US institutional equity investors participating in the study are now willing to accept single coverage across high-touch and electronic trades. Only a declining 31 percent of the institutional investors participating in the annual Greenwich Associates US Equity Investors Study still prefer separate coverage.
Greenwich Associates identifies two main changes that are driving this shift. Firstly, as market structure becomes more complex and trading venues and tools proliferate, investors are deciding that the value of high quality execution consultancy—or advice on how, where and when to execute a trade—outweighs the risk of information leakage.
Secondly, headcount reductions on sell-side trading desks have led many brokers to consolidate the roles of sales trader and execution consultant.
As most institutions execute half of their electronic trading volume through their lead broker and nearly 85 percent through their top three brokers, investors have formed strong relationships with these firms, and sales traders have developed a deep understanding of their clients’ needs and preferences.
Says Craig Viani, Greenwich Associates vice president of market structure and technology: “In many cases investors have found that what started as a cost-cutting move by their brokers hasn’t resulted in negative consequences in terms of information leakage or diminished service quality, but has instead produced a model of comprehensive coverage that provides them with valuable execution consulting.”
