Offshore trading: More than just a cost-cutting measure
In the rapidly evolving world of asset management, outsourced trading is gaining traction as a strategic solution for larger firms seeking to expand into new markets and asset classes, scale their operations efficiently, and maintain operational resiliency.
According to recent data, nearly 30% of managers in Ireland and more than a quarter of managers in the UK plan to employ outsourcing strategies in the next two years. This trend is also evident in the Netherlands, Ireland, Luxembourg, and Guernsey, where a third and more than 40% of managers, respectively, are considering outsourcing their trading function.
One of the key advantages of outsourced trading lies in its ability to facilitate expansion into new markets and asset classes. By partnering with outsourcers, larger asset managers can access expertise in local markets and various exchanges, enabling them to focus on core investment strategies while accessing diverse markets. This approach eliminates the need for significant upfront investments in infrastructure, talent, and technology, which can be resource-intensive and risky if not executed well.
Scaling business operations is another area where outsourced trading providers shine. Operating desks across multiple regions, these providers employ experts with specialized skills, enabling asset managers to scale their operations efficiently across different time zones and asset classes. By leveraging external expertise, managers can focus on their core investment strategies while benefiting from scalable global trading operations.
Operational resiliency is another crucial benefit of outsourced trading. Outsourcing trading operations can enhance operational resiliency by providing access to robust infrastructure and experienced trading teams. This ensures continuous trading activity even in challenging market conditions. Outsourcers can also help manage regulatory complexity and ensure compliance, which is crucial for maintaining operational stability in a rapidly changing regulatory environment.
Cost efficiency and flexibility are additional benefits of outsourced trading. The shift from a fixed cost model to a variable cost model, where clients pay based on actual trading activity, can lead to significant cost savings and financial flexibility. Clients also benefit from audited trading activity to minimize price slippage, ensuring transparency and accountability in trading operations.
In today's market, outsourced trading is increasingly seen as a quality rather than a cost play, supporting expansion, efficient scaling, and operational resiliency. Outsourced trading providers can help integrate their trading capabilities within a client's existing infrastructure, potentially offering additional oversight. A provider that supports global foreign exchange (FX) is essential for managing base currency exposure and enabling seamless cross-border transactions.
For firms in EMEA and APAC, outsourced trading solutions offer an efficient way to tap into the U.S. markets without the burden of expanding their internal capabilities. These solutions encompass the entire trade lifecycle, promoting greater efficiency.
In conclusion, outsourced trading offers larger asset managers a strategic approach to achieving expansion goals, scaling operations efficiently, and maintaining operational resiliency while managing costs effectively. By making agile market responses and focusing on core investment decisions, asset managers can leverage outsourced trading to navigate the complexities of today's market volatility.
- The strategic benefits of outsourced trading extend to finance, business, and technology, as it facilitates expansion into new markets and asset classes, allows for efficient scaling of operations across various time zones and asset classes, and provides access to experienced trading teams and robust infrastructure, thereby emphasizing operational resiliency.
- Partnering with outsourcing providers can lead to cost savings in the finance and technology sectors, as it adopts a variable cost model that minimizes price slippage, ensures transparency, and offers seamless cross-border transactions, thus enabling asset managers to focus on their core investment decisions.
