More and more buy-side firms are re-examining ways to improve their workflow and operational efficiencies as market regulations like MiFID II eliminate many past practices such as research bundling and soft dollaring.
“Clients are much more aware of the broker costs that are associated with OMS products and what their specific needs are,” Aaron Hantman, CEO of Tourmaline Partners, told Markets Media. “I would also say that the level of sophistication in the TCA marketplace has changed and people are more particular in that space.”
The buy side also is looking to outsource portions of their trading desks or their entire desks.
When Tourmaline Partners launched its trade-outsourcing service in 2011, hedge funds represented most of the firm’s client base, but in the past seven years it has grown to include RIAs, family offices, and asset managers of all stripes who wish to outsource their trading operations, according to Hantman.
Tourmaline Partners structured itself as a buy-side trading desk that faces the sell side as an aggregated client on behalf of its client.
“We are viewed as an extension of our clients’ trading desks or as their entire trading desks,” said Hantman.
Clients can remain anonymous with their orders and have their orders identified as only coming from Tourmaline Partners or they can choose to drop the anonymity and have their orders identified as Tourmaline on account of the ‘Client XYZ’, he added.
The vast majority of Tourmaline’s client base, 70%, use the firm’s connectivity and trading services to execute trades in illiquid issues or those that require overnight attention.
For those clients that outsource their trading functions entirely, the firm can support up to 100% of the trade lifecycle including pre-trade compliance and analytics as well as best execution requirements, post-trade analytics, clearing, settlement, operational reporting and TCA calculations, according to Hantman.