InsightsJanuary 12th, 2022
In recent years, across multiple industries, there has been a general trend towards outsourcing. The financial markets industry is no different, as is evidenced by the growth of ‘as-a-service’ offerings from technology vendors, across the front, middle and back office.
The global pandemic has only served to accelerate this trend. With access to established work and technology locations becoming more problematic and less accessible, and with staff increasingly working from home, companies have had to become more flexible and to rely more heavily on their technology vendors and partners to keep critical business processes running.
One particular area that has seen significant growth over the last couple of years is outsourced trading. Whereas middle and back office functions have benefited from outsourcing for some time, recently more buy side firms have started to outsource some or all of their trading functions, as it has gained greater acceptance from investors and asset allocators. Even firms that continue to run their own trading desks are increasingly supplementing these with outsourced trading services, particularly when looking to scale quickly if entering new markets, or to provide additional cover and reach, for example.
Regardless of whether firms decide to outsource all or just some of their trading, it is essential to ensure a seamless transition between their own trading activities, including their technology, and those of their outsourced trading provider.
Many outsourced trading firms however, are compelled to use multiple different trading and OEMS platforms by necessity and typically, they would use one or more vendor systems. As clients of those technology vendors, they don’t have full control or ability to prioritize client requests, they are dependent on those 3rd parties for support. For instance, when implementing any complex workflows as well as any changes on the fly (new accounts, allocations/trade books etc), the outsourcing provider has to place such requests in the 3rd party vendor’s queue. This can seriously disrupt a firm’s workflow.
Workflows are critically important in the front office. Most firms have pre-defined and well-established workflows, from order generation, through compliance checks, to order execution. When moving to an outsourced trading model, those workflows need to remain 100% integrated and uninterrupted.
So how can this be achieved?
Why Technology Counts
Amongst outsourced trading providers, TORA stands out because we are a technology firm first and foremost. Our own outsourced trading team uses the exact same technology that our OEMS customers are using, which we built from the ground up. This offers a number of advantages.
TORA’s OEMS technology is second to none in terms of its functionality, the design of the architecture, the openness of the platform, and its cross-asset capabilities, from front to back office. What’s more, because we designed and maintain the technology ourselves, we can very quickly adapt it to suit clients’ needs.
Clients have access to the exact same tool stacks that we do, and because we access exactly the same environment as them, they don’t need to modify their workflows when transitioning from internal to outsourced trading. Regardless of whether a client is using TORA’s OEMS on its internal desk or outsourcing its trading to TORA, their workflow doesn’t need to change, they will have access to exactly the same setup, the same compliance settings, and the same links to all of their brokers.
The important point here is that the environment is unchanged once the trading is being outsourced. Clients can expand and contract as needed. So if firms are looking for extra, an outsourced trader can fill in for an hour, a day, a week, or longer, with clients just diverting their order flow to the outsourced vendor for trade execution when needed.
Additionally, any data or analytics that a client wants to track from a TCA, liquidity, execution, or compliance perspective is also 100% the same as if it was being run in house. Clients have complete visibility, transparency, and safety checks throughout the entire process. None of those workflows are interrupted when leveraging TORA’s outsourcing.
Another important point is that TORA’s order management system and execution management system is a single unified platform, and it is one of the most comprehensive on the market from a coverage perspective. TORA’s OEMS, and by extension our outsourced trading service, can handle any instrument or trading strategy in any market, whether that’s long/short equities, futures, swaps, options, derivatives, or even ESG strategies. This means that no matter how a client’s trading initiatives might change, TORA’s technology stack and our outsourced trading service can support it.
TORA’s outsourced trading operations also follow the sun. In the same way that the OEMS is global, our outsourced trading service is also global. Our outsourced trading desks can trade the world’s markets, with on the ground traders in each major market – TORA truly offers follow the sun coverage.
Outsourced trading can certainly offer a number of benefits to buy-side firms, but those advantages can only be fully realized if a) the firm’s existing tech stack is integrated with that of the outsourced trading provider in a completely seamless way, and b) the outsourced provider is in full control of the tech. If either of these two criteria are not met, the firm’s workflows may be compromised.
For TORA OEMS clients who wish to leverage outsourcing, whether they are just looking to test a new model, strategy, market or region where they don’t have a lot of experience, TORA’s outsourced trading service provides a cost-effective solution and fully scalable Business Continuity Plan for real world disasters, backup sites or an extra pair of hands in volatile markets.
It can also reduce the fixed cost barriers to entry of hiring a new trader, getting that trader up to speed, and going through all of the necessary HR, compliance and due diligence checks.
Firms in growth mode can outsource additional flow to TORA as and when needed. And for smaller firms with just one or two traders, we can provide the necessary cover for holidays, sickness, and other gaps.
In summary, for any firm looking to achieve more efficient and effective execution by combining a state-of-the-art OEMS with a comprehensive, global outsourced trading service, TORA is unique in its ability to provide both.