Discover why broker-dealers need to invest in their technology stacks to meet the increasing demand for better execution. Learn how buy-side firms are adopting a wheel methodology globally and how it impacts competition between brokers. Find out how BMO Capital Markets is leveraging technology to improve execution quality and stay ahead of the competition.
The Importance of Investing in Technology
( Credit: Tradersmagazine )
Broker-dealers need to invest in their technology stacks to meet the increasing demand for better execution. Buy-side firms have different investment objectives and benchmarks, which leads to competition between brokers.
( Credit: Tradersmagazine )
Many buy-side institutions are adopting a wheel methodology globally, where multiple brokers can participate and compete for execution quality. This shift in tools used by the buy-side requires the sell-side to invest in their technology stack, algorithms, quantitative personnel, and coverage.
Technology Innovation for Better Execution
Technology innovation is crucial to meet the growing demands of buy-side institutions for high-quality execution. BMO Capital Markets aims to bring new technology to a broader audience of clients and improve execution quality through the use of new venues and order types.
Competitors are also looking to leverage technology in similar ways. It is important to focus on the right areas to outsource and invest in to make a meaningful difference in product differentiation and client outcomes.
Globalization of Algorithmic Equity Trading
A report by Coalition Greenwich titled 'Globalization of Algorithmic Equity Trading: A Buy-Side View' reveals that traders in North America tend to look at performance against peers and estimated cost models more than those based in the EU/UK.
This could be due to the lower use of algo wheels in the EU/UK compared to the US. Despite this, the overall trend shows that buy-side firms are increasingly adopting algorithmic trading strategies globally.
IT Spending and the Impact of AI
Worldwide IT spending is projected to reach $5.1 trillion in 2024, with an 8% increase from 2023. While generative AI has not yet significantly impacted IT spending, investment in AI overall supports the growth of IT spending.
Despite challenging market cycles, tech spending continues to increase, highlighting the importance of investing in technology for future growth and competitiveness.
