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June 27, 2014 -

The Future of Dealing Desks

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Asset managers increasingly outsourcing front office

A new report by BNP Paribas Securities Services and Investit found that asset management firms are increasingly looking to outsource their front office.

Drivers include the need to keep pace with new regulatory requirements, advances in technology and the need to diversify in new markets and instruments.

Philippe Boulenguiez, head of Dealing Services at BNP Paribas Securities Services, said: “Asset managers are at a cross roads. They are looking for revenue streams in new asset classes and geographies, while having to demonstrate best execution and cope with market fragmentation.

“All these factors are putting pressure on dealing desks, which need ever more specialist expertise. Asset managers are increasingly coming to the conclusion that it might be far more efficient – both in terms of liquidity and cost – to use an outsourced dealing service instead of setting up multiple dealing desks, some of which might end up being under used.”

Richard Phillipson, principal and director of institutional consulting at Investit, said: “We have been looking at asset managers’ attitudes to outsourced dealing for a number of years. Managers increasingly see outsourcing their dealing function as an economically attractive approach to achieving best execution. They see that the advantages could outweigh perceived negatives, such as losing some in-house expertise. UK based managers are open to experimenting by outsourcing Asian dealing for example. This is a marked change.”

As part of this report, Investit surveyed 31 investment managers, ranging from in-house pension managers through to global asset management firms.

Asset managers highlighted the following advantages to outsourced dealing:

• Lower costs including personnel, data and technology costs
• Scale benefits giving access to robust technologies and specialist teams
• Extended dealing hours and increased proximity to markets, thanks to outsourcers’ multiple locations
• Reduced operational risk and cost of errors

BNP Paribas Securities Services’ Dealing Services teams handles over 500,000 orders annually for over 30 clients, accounting for approximately EUR 550 billion in assets under management.

The full “Dealing with the future of dealing desks” report is available here.