Many industries have realized the benefits of outsourcing, and the financial trading industry is no exception. Many managers are opting to partner with a third-party company providing outsourced trading services.
The rising popularity of outsourced trading has led to the emergence of several different types of trading. Each can offer a unique set of benefits to anyone looking to outsource trading services in the future.
1. High-Touch Trading
High-touch trading is the simplest and most straightforward type of outsourced trading offered in today's financial market.
Portfolio managers can enjoy face-to-face interactions with a single executive broker who will handle all trading activities. Trading is kept in-house with a high-touch trading model, so no decisions are farmed out to third-party providers.
Since high-touch trading is designed to cater to the needs of small and mid-size portfolio managers, a high-touch executive broker is able to provide limited research, portfolio monitoring, and market color services.
2. Full-Service Trading
The full-service trading model is designed to benefit large portfolio managers who can't see a cost-benefit in establishing an in-house trading desk.
All aspects of the trading process are managed by an outsourced party within a full-service trading model. The portfolio manager interfaces with a single broker. The broker is then responsible for working with third-party providers to secure access to research brokers, prime brokers, and others.
One of the major benefits of full-service outsourced trading is the ability to customize trading services around the existing technology and infrastructure of the portfolio manager's firm.
3. Enterprise Trading
Enterprise trading encompasses all of the same benefits offered by full-service outsourced trading, but this type of outsourced trading goes a step further in the management of trading activities.
In addition to offering the full management of all trading, research, and market color services, a company offering enterprise trading will work to establish operational support and technology infrastructure for a portfolio manager's firm. This can be a great value for managers looking to enhance the services they offer to their customers.
Enterprise trading includes the selection of a technology platform, system support and help with sponsorship, and the potential for an outsourced trading desk employee to be housed inside a portfolio manager's office space.
No matter what type of trading services you may be looking for, there is a company offering outsourced services that will cater to your needs. Being familiar with the types of outsourced trading offered in today's financial market will help your firm take advantage of outsourcing in the future.