Advanced Automation Will Bring Greater Efficiency to the Commission-Recapture Process, Says TABB Group

NEW YORK & LONDON--(BUSINESS WIRE)--In new research published today, TABB Group says that recent advancements in automating low-touch trading are helping to ease institutional investors’ traditionally manual, often burdensome commission-recapture process.

“Sophisticated asset managers are already automating as much of the order-handling, commission-allocation and administrative tasks that they can.”

According to Cheyenne Morgan, research analyst and author of “Automated Trading Decisions: Unifying the Goals of Asset Managers and Asset Owners,” as the buy-side’s trading desk becomes more efficient, their sales traders are able to focus greater time to and attention on high-touch trading, adding the most value for their customers.

The new research note focuses on how developments in automation technology will allow asset managers to streamline low-touch, labor-intensive responsibilities, such as satisfying commission-recapture programs and focus on more nuanced tasks, ultimately generating alpha. The report also covers automation solutions available today, including various software platforms that help implement low-touch and no-touch trading strategies.

Commission recapture is a key area in which technology is needed to bridge the gap between asset owners’ objectives and the reality of their asset managers’ trading workflow, Morgan explains. Although both owners and managers want to lower costs, directing trades for commission recapture can introduce inefficiencies and potential conflict. “New technology can ease this commission-recapture process by providing collaborative tools that automate which orders are more appropriate for lower commission costs based on criteria set to meet each manager’s and owner’s objectives.”

Because asset owners are insisting that asset managers manage costs more efficiently, Morgan says new trading desks should be as automated as possible without sacrificing best execution and performance. For managers, deploying time-saving features has never been more critical especially now that basic buy-side services such as outperforming benchmarks and best execution have become harder to achieve in today’s overwrought market structure with high-correlations, low-liquidity and tight-performance dispersion.

“Advancements in new technology that are capable of satisfying long-standing automation needs of the asset manager’s traders while automating the process of lowering commission costs for asset owners are proving invaluable in today’s volatile market,” says Morgan. “Sophisticated asset managers are already automating as much of the order-handling, commission-allocation and administrative tasks that they can.”

The Executive Summary for the 11-page report with 5 exhibits is available now for review. TABB Group Research Alliance Equity clients and qualified media can download the report at http://www.tabbgroup.com/Login.aspx. For more information or to order the report, write to [e-mail].

About TABB Group

With offices in New York, London and expansion to Asia-Pacific, TABB Group is the only financial markets research firm focused solely on capital markets, based on the proven interview-based research methodology of “first-person knowledge” developed by founder Larry Tabb. For more information, visit www.tabbgroup.com. In January 2010, TABB launched TabbFORUM, the online global capital markets community covering analyses of current issues, tracked daily by nearly 13,000 professionals.