The traditional relationship between the buy side and the sell side is in flux. With factors such as the unbundling of research and execution dollars, the democratization of equities trading technology offerings, and new and more dynamic regulatory requirements, the usual paradigm between brokers and clients has been drastically changed. Brokers’ clients have evolving needs and they face shifting challenges, which necessitates a corresponding change in how the sell side serves them. So, in this new landscape, what traits does the buy side look for in their brokers, and how do brokers differentiate themselves and demonstrate unique value?
The rise of electronic and algorithmic trading has irrevocably changed how the financial markets operate. Equity markets have been known to be almost entirely electronic since 2015. Moreover, according to Greenwich Associates, over 90% of equity flows are executed electronically in liquid, developed markets like the U.S. It’s no secret that floor trading has dwindled. Just take a look at the floor of the New York Stock Exchange. When I was a specialist, there were thousands of traders and market makers on the floor of the exchange, but in the past decade or so that number has dropped to only a few hundred.