The world of U.S. equity trading is evolving rapidly, with a significant expansion in electronic trading. As a result, many “low-touch” trading desks—those that primarily handle automated trading—are planning to expand their teams over the next year or so. This growth is driven by the need to keep up with the increasing volume of e-trading, despite challenges such as shrinking commissions, staffing shortages, and tightening regulations.
A recent study by Coalition Greenwich reveals that about a third of U.S. sell-side electronic equities professionals are looking to strengthen their algo sales and desk coverage. Meanwhile, a quarter plan to enhance their execution and analytics consulting, on-desk trading assistance, and algo support roles. Staffing issues are a significant concern, with half of the study participants citing short staffing as a major challenge.
To cope with these challenges, many trading desks are outsourcing some functions. Over three-quarters of respondents route part of their electronic client flow through third-party platforms, with nearly half relying on these platforms for the majority of their flow. Algo customization has become a key selling point for brokers, but only a small percentage manage all their algo tech in-house due to integration issues and internal compliance demands.
Looking ahead, brokers see artificial intelligence as a potential solution to alleviate pressure from understaffed desks. However, full replacement of traders with AI is not yet feasible. The report underscores the growing importance of algorithmic trading strategies, highlighting how sell-side firms are leveraging technology to improve efficiency and differentiate their services.
