Latest news
Back to articlesOutsourced Trading is a Win for Ops. Heres Why.
For a long time outsourcing was misunderstood - but no longer. Today, the augmented team model is changing the face of many industries and verticals, and investment management is no different.
Augmented or embedded outsourcing allows investment firms to secure the talent and resource that they need, but with the flexibility that is so crucial in the modern economy. As an outsourcing pioneer within investment management, OSMO has long been vocal about the benefits of this model from a trading perspective. But the value of augmented or outsourced team members can be felt throughout organisations - and nowhere is that value more significant than in operations.
Simplify to win
Outsourcing allows businesses to simplify, streamline, and rationalise their operations. There are several key ways in which this manifests.
Outsourced trading solutions allow for a management firm's entire flow to be consolidated through a single party, with benefits for both commission and quality of service. By engaging just one partner it is far easier to build good relationships and iron out any recurring settlement issues. In particular, having a single counterparty means that settlement issues can be dealt with promptly and through one point of contact, thus reducing the potential for failing trades. Consolidating a firm’s entire flow through one pipe, while still maintaining a diverse network of underlying execution counterparties and venues, also means the client benefits from a single commission template, simplifying operations and often yielding a lower commission rate. Outsourced trading partners can also provide Transaction Cost Analysis (TCA) on the client’s consolidated flow, helping to identify and meet best execution requirements set out in MiFID II.
An outsourced trading partner ultimately acts as a client’s conduit to the Street. This represents huge time savings as relationships are developed and managed on your behalf, and access is gained to trading lines and venues that would otherwise be closed off to smaller firms spreading their flow across multiple actors. Because the trading partner maintains these relationships, the in-house burden of overseeing a broker network is significantly reduced. This means, amongst other things, less time spent onboarding new trading counterparties and less time on KYC.
Meanwhile engaging an augmented or outsourced trading partner means cost can be accounted for with a single fixed line in the budget or, compliance issues permitting, may be accounted for within the fund’s execution costs. Additionally, critical roles that would previously have required a full-time hire (or even two, for fallback reasons) despite not being a full-time commitment can now be covered by third-party specialists. The result is reduced costs, the elimination of resource sinks associated with people management, and the opportunity for firms to redeploy talent or operate with a lower headcount.
Completely frictionless engagement is the ultimate goal, and outsourcing gets us significantly closer to that prize. A single desk to contact for any questions or concerns, plus the reduction in settlement issues, can significantly reduce the operations resource burden. With simple, streamlined operating models and highly competitive pricing, trusted outsourcing partners such as OSMO now represent a significant value-add versus traditional in-house hires.
Security and flexibility
Despite the explosion in outsourcing, we of course understand that there remain some concerns about the safety of this model. For some market participants, outsourcing is still associated with sub-optimal offshore service providers and faceless teams you will never meet.
OSMO leads the new wave of augmented teams within financial services, combining the best-in-class talent demanded by the market with the flexibility that is now a core demand of modern business. It is our firm belief that businesses in capital markets and beyond can ultimately operate according to an almost entirely decentralised model. By engaging with an augmented or outsourced provider, managers can ensure the efficient operation of their funds while moving further up the value chain. This principle applies not only to trading desks but also, we believe, to virtually every part of a fund's operations.
Ready to streamline and win big? Call us today.
Back to articles