Last month, Tourmaline Partners Managing Director Tim O’Halloran participated in “Outsourced & Supplementary Trading in a Post-Pandemic World,” a panel at Security Traders Association’s 89th Annual Market Structure Conference. He discussed the rise of outsourced trading firms, the evolution of the offering, the types of firms offering outsourced trading and the factors driving success of an outsourced trading relationship.
“Outsourced trading began for purely economic reasons: hedge funds would launch and didn’t want to pay for a trade desk. Now it’s less ‘outsourced trading’ and more ‘supplemental trading.’ The drivers are now a workflow improvement and alpha. That’s why the business has grown,” said O’Halloran. “The industry has evolved in a way that has left a gap. You have buy-side firms that have severely limited the list of brokers they deal with. Regardless, there is liquidity and information out there from the large number of brokers not on their list, and supplemental trading fills that gap.”