Boston, November 16, 2010 – A new report from Aite Group analyzes the current state of affairs in the U.S. equities market, summarizing key trends of the last two years and highlighting major changes that are paving the way for the next iteration of market structure. Perhaps most importantly, the report visits the concept of execution consultants and discusses the central role that execution consultants must play in the evolution of the U.S. equities market.
While the market has bounced back from the credit crisis of 2008, declining volume, regulatory uncertainty, and growing political pressure for change have created an anxious trading environment. Still, buy-side adoption of self-service execution services (e.g., DMA and algorithmic trading), continues unabated; the sheer complexity of today’s market structure makes it almost impossible for any market participant to approach it manually. Just five years ago, the emergence of these sophisticated trading tools brought about the concept of execution consultants. Leading brokers began building a group of client-facing experts composed of traders, technologists, market structure experts, and client management personnel to educate and support their customers and help them navigate the rapidly changing institutional trading landscape. In 2005, execution consultants were an exercise in internal reorganization; today, they are purveyors of structural and cultural change within a brokerage operation.
“It has become incredibly difficult to be an effective broker/dealer in today’s complex market structure,” says Sang Lee, managing partner with Aite Group and author of this report. “This is one of the main reasons why developing a comprehensive execution consultant service will be key to the success of many broker/dealers. Brokers/dealers must evolve with the market, moving from being order-takers and technology providers to becoming true partners for the buy-side, helping the buy-side navigate the many options in trade execution and protecting their interest against smarter liquidity sources in open markets. In this way, broker/dealers can ensure that all market participants benefit from existing market structure.”
The report profiles the following full-service and agency brokers: Bank of America Merrill Lynch, Barclays Capital, Bloomberg Tradebook, Citi, ConvergEx, Credit Suisse, Deutsche Bank, Goldman Sachs, Instinet, ITG, J.P. Morgan, Knight, Lime Brokerage, Liquidnet, Lightspeed, Morgan Stanley, Pragma, SunGard Valdi Liquidity Solutions, UBS, and Wells Fargo Securities.
This 50-page Impact Report contains 18 figures and 10 tables. Clients of Aite Group's Institutional Securities & Investments service can download the report.