Research: the new driver for online trading

Here’s an interesting new trend.

The business groups in banks that drive online trading initiatives in general, and SDPs in particular, are usually the trading desks – particularly, of course, in OTC markets like rates and FX.

So it’s notable that we are currently talking to the research divisions of three tier-one banks about integrating with trading. All large banks already have extensive institutional portals offering research, trade ideas and technical analysis to their customers. What’s happening now is that the research divisions that own these are looking for ROI — they want to see a direct route from their ideas to an executed trade.

There are two reasons for this: (1) it obviously makes sense to try and capture a client’s business there and then, by providing a smooth and easy route from research into execution; and (2) the research divisions want to justify their cost by associating themselves directly with revenue.

I’ve long been preaching the message that banks need to focus on vertical integration (pre-trade, execution, post-trade) in SDPs as well as horizontal integration (cross-asset). But it’s interesting to see this being driven so strongly now from the pre-trade end rather than from the trading end.

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