12 July 2021
Global trading markets are continuing to evolve. When it comes to trade execution, the shift from high-touch to low-touch has been growing rapidly. In the past, most client order executions would have been carried out by human traders. This was known as high-touch trading, could often be opaque and carried an in-built tendency towards latency issues.
Because there was no way that buy-side clients could monitor how broker desks dealt with orders, there was always the potential for mistrust.
High-touch trading often made sense for illiquid stocks, but it could be inefficient for liquid, high turnover stocks.
At the other end of the spectrum is entirely automated electronic trading. This is no-touch trade execution and usually allows for direct market access for clients with little in the way of oversight and other services.
Low-touch trading combines the direct market access of impersonal electronic trading with the services and oversight of a high-touch trader. This makes it markedly different from electronic trading but helps to reduce some of the possible drawbacks associated with high-touch trading.
Low-touch trading helps to make markets faster and more efficient. It speeds up trade execution, enabling a greater quantity of trades to occur and for the whole process to become more transparent.
Does this method of trading have any particular market impact?
Market impact is the effect that a market participant has on the price of an asset they are buying or selling. Market impact can be a key consideration for large institutional investors, particularly when it comes to trades featuring large amounts of money.
Concerns over market impact have, in the past, been expressed concerning electronic and low-touch trading due to the large quantities of trades they can transact. These concerns are, however, increasingly misplaced. With huge advances in computer technology, data analytics and storage, more and more trading is now automated.
The algorithms used are designed to target venues with maximum liquidity. They’re also adaptive to evolving market conditions and will change their trading stance accordingly.
Algorithms are also configurable, meaning they can be tweaked to behave in an aggressive, neutral or passive manner depending on market conditions and the specific order execution.
Algorithms can also incorporate analytics and historical data to make better trade routing decisions.
Low-touch trading is, therefore, no more likely to have a significant market impact than high-touch trading.
Combining both market knowledge of high-touch trading with the efficiency of electronic trading, low-touch trading is the key to success in effective trade execution.
A broker should have access to the right technology and the right degree of expertise and local market knowledge to achieve low latency. Orders should be executed as timely and efficiently as possible.
When executed correctly, low latency should serve to make markets more efficient and reduce the risk of significant market impact.
GIS HK low-touch trade execution services have true global reach. Our approach combines innovative technology with a wealth of tier-1 experience and Asia-Pacific knowledge.
We work intelligently to ensure low latency and minimal market impact giving your trades the very best chance of playing out as you had planned.
Call +852 3018 3009 or email email@example.com to find out more about our efficient and dependable Asia-Pacific trade execution services.Back to News