Receiving ‘proper coverage’ from brokers cited as buy-side’s biggest pain point in equity trading workflow in new report

Research found that nearly half of buy-side respondents want separate coverage relationships with their brokers’ high- and low-touch desks.

Over half (54%) of buy-side respondents say that getting proper coverage from their brokers is one of their biggest pain points in their daily equity trading workflow, a new report from Coalition Greenwich has found.

When asked specifically what ‘proper coverage’ means, one respondent noted that this meant brokers who put their best foot forward without being asked, with other respondents noting the importance of continuity.

Nearly half (47%) cited operations, middle- and back-office and settlement issues as another key pain point. Coalition Greenwich did, however, note that this is a frequent area of concern among asset managers, spanning the entire asset class spectrum.

With the move to T+1 already in full swing, respondents noted that the acceleration of settlement times is expected to present a much larger issue operationally in the future.

Read more: T+1 settlement: The seismic post-trade change impacting the trading desk

Possibly related to these concerns, Coalition Greenwich found that nearly half of respondents (49%) want separate coverage relationships with their brokers’ high- and low-touch desks. A quarter said they prefer a one-touch/hybrid coverage model, while 26% said it depends on the broker.

Looking at the most important attributes of high-touch trading counterparties, the report found that 87% of respondents place block trading and the ability to source natural institutional liquidity as a key criteria.

The second most highlighted attribute (70%) was customer service, including proactive order colour, emphasising growing demands for improved ease of use and reliability.

On the other end of the spectrum, when evaluating a new broker’s low-touch platform, the report found that 68% of the buy-side seek provable execution quality metrics/transaction cost analysis (TCA) results.

The ability of the low-touch platform to cross blocks or source natural liquidity with the high-touch desk with another key area of focus for traders (53%), as well as the reputation of the low-touch desk (47%).

“Even though it’s becoming an increasingly electronic world, the basic hierarchy of buy-side needs hasn’t changed: Provide reliable offerings, whether human- or electronic-based, that perform well and integrate with their workflow,” said Jesse Forster, senior analyst at Coalition Greenwich Market Structure & Technology, and author of the report.

“Back this with high-quality support for when things invariably go wrong. That’s it—that’s the ask. The playbook’s wide open for those who wish to study it.”

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