Buy-Side Spending on Trading, Research Snaps Five-Year Slide

(Bloomberg) -- For years, equity analysts and traders saw the value of their services dwindling in the eyes of institutional clients. In the wake of the Covid outbreak, that appears to be changing. 

As trading surged and demand increased for economic and market analysis to help navigate the uncertain post-pandemic world, buy-side spending on payments for trade execution and research jumped 11% from a year earlier to $7.36 billion in the 12 months through March, data compiled by Coalition Greenwich show. That’s the first gain in at least five years. 

Whether this was a one-time bump or not remains to be seen, but the data refute fears that human traders and analysts will one day disappear with the proliferation of trading technology and easy access to business intelligence. 

Take trading for instance. Transactions executed by broker sales traders have been in steady declines, with so-called high-touch trades now accounting for 44% of the total, down from 56% in 2012. Yet portfolio trading, which involves buying and selling a basket of securities in one order and requires sophisticated algorithm to make it work, almost doubled over the stretch.  

To Shane Swanson, senior analyst of market structure and technology at Coalition Greenwich, the shift reflects an evolution where the job of human traders has become one that demands high data-analytical skills. 

“Human capital is something that won’t go away from the market,” Swanson said by phone. “There still have to be people who understand the market. They have to be able to interpret what is happening in the market. And even to the extent you have to be able to take the data in, to be able to tell the algorithms how to trade and to be able to tweak the algorithms when they need to be tweaked.” 

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