Feeding the "Alpha-Seeking Beast" Requires Access to Worldwide Markets and Cross-Asset Trading Systems to Manage Complex Transactions, Says TABB Group.

NEW YORK -- Blame it on alpha but according to TABB Group in its newest research note, "Cross-Asset Trading Systems: Controlling the Trader's Desktop," traders on both the buy-side and sell-side need trading systems that can manage the increasing complexity of the global financial markets, allowing them to manage complex, cross-asset transactions involving cash equities, fixed income, derivatives and currencies. "Access to markets throughout the world, many with different trading protocols and market structures, will become imperative, feeding the alpha-seeking beast," writes Andy Nybo, senior research analyst at TABB Group and author of the note.

"Sophisticated money managers are being forced to approach investing in an entirely new way, no longer gaining exposure to an industry by simply investing in the equity of the most promising companies," adds Nybo. "Today, they're deploying complicated, inter-related plans that expose them to securities and strategies outside their traditional comfort zone, exploiting arbitrage opportunities across capital structures and achieving investment goals by using the most efficient financial instrument, or combination of instruments, to achieve desired exposure, risk and reward."

While both buy-side and sell-side firms are using complex trading strategies that cannot be supported efficiently by current trading infrastructures, one of the biggest challenges facing the buy side, for example, is the breadth and range of vendors that deliver systems. Order management system (OMS), execution management system (EMS) and direct market access (DMA) system functionalities have become indistinguishable and, says Nybo, "choosing the right product for the trader's need is a challenge in its own right, especially when trading desks are trying to execute multiple strategies across markets with differing liquidity profiles.

He explains that although there is a growing need for systems that can manage the complex trading process for myriad securities across multiple asset types in disparate geographical regions around the world, "it's no longer feasible for firms to view strategies in disconnected isolation." Further, connecting directly to market liquidity is critical for securities firms with global activity, increasing the need "for real-time data, direct access and the capability to feed into front- and back-office trading systems."

"Traders on both sides of the Street can no longer simply specialize in singular asset classes," says Larry Tabb, CEO and founder at TABB Group. "Fortunately, trading systems that do support these new, complex strategies are more broadly available and in our opinion will become indispensable to trading desks embracing the aggressive use of technology."

This TABB Group Vision Note examines market forces causing firms to reevaluate the technological tools used on their trading desks and how factors like market structure, the move toward further automation and the search for alpha are driving them to implement systems capable of effectively handling the global trading environment complexities. The report also lists leading broker-sponsored EMSs and independent trading-system solution providers.

The report can be downloaded by TABB Group Research Alliance clients and qualified media at http://subscriber.tabbgroup.com. To request an executive summary or to purchase the report, email [e-mail] or visit http://www.tabbgroup.com/research.

About TABB Group

TABB Group is the financial markets' research and strategic advisory firm focused exclusively on capital markets. Founded in 2003 and based on the proven interview-based research methodology developed by founder Larry Tabb, TABB Group analyzes and quantifies the investing value chain from the fiduciary, investment manager, broker, exchange and custodian, helping senior business leaders gain a truer understanding of financial markets issues. For more information, visit www.tabbgroup.com.