Automated Trading Decisions: Unifying the Goals of Asset Managers and Asset Owners

Commission recapture is a key area in which technology is needed to bridge the gap between asset owners’ objectives and the reality of their asset managers’ trading workflow. Although both asset owners and asset managers want to lower costs, directing trades for commission recapture can introduce inefficiencies and potential conflict.

Recent advancements in new technology are helping solve conflicts between asset owners and their asset managers by improving performance and eliminating manual and burdensome commission recapture trading requirements. New customizable trader-productivity tools allow order flow to be routed to the appropriate brokers with little or no touch from a sales trader.

Automation has been slow to reach this area of trading. As enticing as the idea of automating the commission recapture might be traders are cautious about making changes to their workflow. As a result, many asset managers avoid commission recapture altogether. Asset owners have asked that their managers direct as much as 25% of their commissions through a commission recapture program but asset managers seldom reach that goal.

Today, asset managers are becoming better equipped to find the best ways to implement the commission recapture process and become better aligned with asset owners. They are becoming more aware of the types of trades they are willing to let bypass the trader for automated selection, routing and execution. With a more efficient process implemented, traders will now able to focus on high touch trading where they can add the most value.

The TABB Group Vision Note Automated Trading Decisions: Unifying the Goals of Asset Managers and Asset Owners focuses on how developments in automation technology will allow asset managers to streamline low-touch, labor-intensive responsibilities such as satisfying commission recapture programs and focus on more nuanced tasks, ultimately generating alpha. The report also covers current automation solutions available today -- including various software platforms that help implement low-touch and no-touch trading strategies.