Outsourced Trading, Part 2: Outsourced Traders' Perspective

Outsourced trading started from humble beginnings over twenty years ago as an option for start-up hedge funds that could not afford their own in-house trading team. Today, there is no one-model of outsourced trading. We are seeing traditional sell-side brokers, prime brokers, clearing & custody banks, boutiques, technology firms, etc. entering the outsourced trading service space with their own unique brand of outsourced trading service offerings. TABB Group believes that governance will be an increasingly important aspect of the outsourced trading relationship as the industry grows. Risks around choosing and managing outsourced trading desk relationships are going up as clients get larger. Operating policies and reporting procedures must be clearly outlined in the outsourced trading agreement As the diversity of outsourced trading service options grow and governance considerations increase, buy-side firms searching for outsourced trading services are often left with many unanswered questions.

TABB Group conducted in-depth interviews with 30 outsourced traders and 30 buy-side traders to help shed light on this rapidly growing segment of the brokerage industry. The results are published in two parts. To access the first report focusing on the buy side’s biggest concerns associated with the use of outsourced trading services, download:  Outsourced Trading, Part 1: Buy-Side Perspective