Broker relationships remain the primary means of trading derivatives “despite the perception that futures trading can be done electronically,” Andy Nybo, senior analyst with the TABB Group, said today at a Financial Technologies Forum conference in Chicago. In the firm’s recent survey of traders at 55 asset management firms, including 36 hedge funds, 57% of respondents ranked trading systems as the most important impediment to trading efficiency, he said, adding that the lack of technological advancement is reinforcing brokerage relationships.
The survey also found that 69% of the order flow is directed by phone, and respondents expect 60% to still be directed by phone in two years. Large firms direct 90% of their trades by phone and 10% electronically, but small firms direct 39% by phone and 61% electronically.
“Broker relationships are critical in the derivatives market, especially as you get into more complex instruments,” Mr. Nybo said. Small firms tend to have more automated strategies and pursue more liquid contracts, he said.
