Fidessa examines impact of liquidity fragmentation on Australia’s broker community

Second white paper in Australia series looks at opportunities and challenges facing local sell-side firms

Sydney, 12th October 2011 – Fidessa group plc (LSE: FDSA), provider of high-performance trading, investment management and information solutions for the world’s financial community, has today published the second in its series of white papers looking at issues raised by the new market integrity legislation in Australia.

Entitled Stuck in the Middle with You? A look at the future for brokers in Australia’s new trading landscape, the paper draws on Fidessa’s global experience to consider the challenges and opportunities brokers and banks will face and outlines the changes they need to consider if they are to take advantage of Australia’s new trading environment. It builds on the themes of the first paper in the series, Aussie Rules, which looked at the impact of the arrival of alternative venues in Australia, the role to be played by smart order routing (SOR) technology and the lessons to be learned from other markets.

Steve Grob, Director of Group Strategy at Fidessa and the paper’s principal author, says: “The Australian marketplace is entering a fascinating phase in its history, and there are plenty of clues about what brokers and investment banks can expect from similar developments elsewhere in the world. The journey towards a new shaped marketplace has begun and, as in other countries, although the changes will doubtless begin modestly, the effects on brokers are going to be far reaching.”

Fidessa's white paper describes the likely challenges sell-sides will have to meet, including the need to deliver and demonstrate best execution across a dynamic spectrum of lit and dark venues, as well as establishing an optimal position in the queue for order flow in accordance with their size and technical capability. Grob adds: “Service providers on the sell-side will find themselves operating in a new ecosystem; every participant will need to find a position in which they can deliver real value, and those that can genuinely help their clients navigate the new Australian trading landscape will prevail. We believe there will be a degree of polarisation too as brokers opt for one of two business models: scale or specialisation. The middle ground in-between is something of a no-man’s land, and those firms that remain there may find life pretty challenging.”

Subsequent papers in the series will address the specific issues for retail and institutional investors, high-frequency traders and venues in more detail. Stuck in the Middle with You? The future for brokers in Australia’s new trading landscape is available through the Fidessa website, fidessa.com, or by contacting info@fidessa.com.

PDF (0.06 MB)