Trends in Equities Trading 2018

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Stable Headlands at the Confluence of High- & Low-touch Services

This report reviews the 2018 state of the equities market structure from an investment banking perspective in terms of the utilisation of trading technology and in terms of business model positioning and design. Following a decade of turmoil, equities markets have nearly completed the transition from low-volume, high-value, voice-dominated high-touch trading models to high-volume, low-touch e-trading models. The report demonstrates that sellside equities execution franchises are once again stabilising both their top-line revenue and headcount figures as banks settle into new business models following the financial crisis era regulatory challenges for traditional, voice-centric, proprietary trading business models.

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The newfound stability for these execution franchises is manifesting itself in sellside equities business headcounts globally levelling off at about 70% of pre-financial crisis levels, and in overall investment banking equities trading revenues becoming less variable and now approaching USD 100bn in a gradual fashion. Concurrently, sellside trader workflows changed radically over the past decade, resulting in the birth of so-called ‘how-touch’ trading. In 2018, the workflows for high- and low-touch bank traders are largely identical, and differentiation in workflows relies on the frequency and manner in which those traders manually interact or intervene with the electronically submitted client order as it passes through different parts of the bank’s technology stack.

Trading functionality – particularly in the low-touch space – is largely commoditised, leaving banks with little scope for competitive differentiation. In light of the technological commoditisation of the functional stacks of cash equities and equities derivatives trading technology solutions, banks can now choose from a range of vendor-provided systems, taking advantage of cost savings without sacrificing functionality. Going forward, large banks will look to differentiate themselves through bespoke extension of otherwise commoditised technology stack functionality.

Published on: 29 Mar, 2018

Trends in Equities Trading 2018 – Table of Contents

  • 1.0 Competition Overview: Bigger is Better
    • 1.1 Equities Trading Revenues & Market Structure Stabilisation
    • 1.2 Divergence within Sellside Equities Execution Franchises
    • 1.3 High- and Low-touch Workflows Become How-touch
    • 1.4 The Convergence of High-touch & Low-touch Systems
  • 2.0 The Prominence of Technology Vendors
    • 2.1 Trading Technology Commoditisation: OMS, EMS & OEMS
    • 2.2 The Buy vs. Build Trading Technology Debate
    • 2.3 Equities Trading Technology Market Leaders
  • 3.0 The Coming Battles
    • 3.1 The Impact of Regulations
    • 3.2 Sellside Strategies to Achieve Competitive Differentiation
  • 4.0 Appendices
    • 4.1 Glossary of Terms
    • 4.2 Table of Figures