[ A PA C
A L G O
S U R V E Y ]
Fig 4: PROVIDER COUNT
Provider Count
% % % % % %
2012 2013 2014 2015 2016 2017
1 34.15 23.19 23.93 24.39 33.01 20.75
2 14.63 10.14 22.22 19.51 15.95 16.98
3 13.41 17.39 11.15 17.07 9.97 18.87
4 12.20 11.59 5.98 14.63 18.04 13.21
5+ 25.61 37.68 36.75 24.39 23.02 30.19
a desire to get best execution, but also the increasing
trend towards unbundling commission and research
that was sparked by regulation in Europe but which
appears to be spreading across the world. Providing
excellent support to clients should inevitably be at the
top of any sell-side priority list.
Moving on to Fig 2, which examines the priorities for
the buy-side when using a trading algorithm, we can
see that execution consistency is seen as the most vital
component. This comes as little surprise as getting
consistent execution is surely the reason to use an al-
gorithm over a sales trader anyway. However, this has
notably increased in importance for the buy-side with
14.29% of respondents saying this was their priority
when using algorithms, up from 11.37% in 2016. As
alluded to above, this may be due to a greater focus on
execution quality by both regulators and end investors
and being able to achieve consistent results is crucial
to benchmark and judge the quality of each individual
algorithm and each provider.
Mirroring our global algorithmic trading survey,
ease-of-use also continues to be a major factor for algo
users with 13.61% saying this was a reason for using
algorithms, and the reasons are likely to be much the
same. The level of technology available to buy-siders
has become far more sophisticated in recent years as
has borrowing user interface ideas from the consumer
software sector. Clunky, ugly and complex interfaces
seen in older proprietary systems are increasingly
unattractive and inefficient for buy-side firms who
expect a much sleeker experience.
One word of warning for the Asian algo community
however is that both in 2017 and historically, the areas
where they scored highest, customer support and
execution consulting, are fairly low on the priority list
for asset managers. Execution consulting in particular
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Winter 2017
was seen as a priority by just 4.08% of respondents,
while 6.12% mentioned customer support. It will be
interesting to see if this changes as the focus on best
execution increases or whether the high scores in this
area are sufficient to mean that buy-side firms do not
see this as a major concern when selecting provider as
they already believe performance is good.
When looking at the average number of providers
the buy-side are using seen in Fig 3, the recent trend of
declining broker lists among larger firms seem to have
reached a resting point, with the largest asset man-
agers (those with $50 billion or more of assets under
management) levelling out at an average of 3.8 after
having fallen for several years. This mirrors a similar
trend seen in the rest of the world.
Not surprisingly we see the number of brokers used
increasing alongside AUM. This has become a more
pronounced trend in recent years and now shows a
much heavier correlation than in the past. Given there
have been reports this year that brokers are streamlin-
ing their client lists, focusing more on the biggest asset
managers who are more profitable at a time when
bank trading desks are squeezed. We expect this will
continue post-MiFID II as more brokers look to max-
imise profitability and make their broking business
sustainable.
Fig 4 shows a slightly different angle on this issue by
looking at the percentage of respondents using differ-
ent numbers of brokers. Notably the top and bottom
ends are the largest here, with 20.75% of respondents
using just one provider and over 30% using five or
more. Those firms using just a single broker are of
concern as such behaviour seems to fly in the face of
the concept of best execution and could become a very
serious problem if regulators begin to take a tougher
line on this issue. It is hard to argue you are getting the