Living with Giants—Tough Times for the Institutional Sell-side Market

The institutional sell-side market has had a tough time over recent years. Concerns over economic outlook, shrinking commissions and rising costs are driven by regulatory and structural change. Moreover, they make equity broking and client facilitation ever more challenging. Competing with the large global investment banks can appear daunting. However, regional players and domestic brokers still have a few cards to play.

All banks, whether large or small, struggle with cost and complexity. Global sell-side firms want to offer their clients universal access to equity markets, but this one-stop-shop strategy is economically challenging.

Increasingly, costs of domestic exchange membership and local connectivity don’t add up outside the core markets of the global players. So increasingly, top tier firms look to white label trading on regional markets through sponsored access and DMA.

Partnering with local counterparty banks is a good strategy. However, local partners must have the infrastructure to facilitate performance levels and scale that a Tier 1 bank demands.

This also works in reverse. Another advantage that local banks and brokers have over large international counterparts is an intrinsic understanding of their clients’ trading strategies and investment mandates through strong relationships built up over years.

For domestic asset managers who want exposure to international investments, local banks can achieve this by establishing relationships with large global brokers. Local banks can feed global brokers orders to be executed on European, North American and Asian markets.

This ‘white labelling’ of market access and execution services is gaining momentum across all access classes given the trend of liquidity fragmentation and regulatory focus on best execution. However, firms who want to offer this need the right infrastructure and tools.

Rapid Addition has been working with sell-side banks and brokers in South Africa and other regional markets to implement trading platform technology that facilitates even the most demanding counterparties.

Leveraging the messaging platform RA Hub for seamless counterparty onboarding, our customers reduce the time-to-market for establishing new trading relationships.

Layering on RA FastLane risk filters, our FPGA solution allows sell-side firms to handle latency-sensitive sponsored access and DMA clients.

Order flow can be sent directly into our customer’s risk gateway situated within the JSE co-lo facility for cost-effective connectivity within South Africa.

The combination of Rapid Addition’s innovative trading technology solutions with the unique strengths of our customers is helping them compete and thrive in the ever more automated equity trading landscape.

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About Rapid Addition

In 2003, Rapid Addition developed the first repository-based FIX engine. We continue to innovate and lead the world of electronic trading technology with high performance FIX solutions.