Sourcing Global Liquidity, Research and Market Intelligence in Real-Time
Less than two years ago we opined on the growth and acceptance of leaning on experts to help trade offshore markets. (Our thoughts may be found here.)
This trend continues to resonate globally. We see continued demand for Tourmaline Partners’ Supplemental Trading resources – helping our clients source liquidity, (both low– and high-touch), and helping them expand their reach to investment research and real-time market intelligence from overseas brokers and independent sources.
In North America, for example, an investment manager may onboard Tourmaline as a single, sell-side broker counterparty that can immediately provide a path to liquidity from a plethora of brokers in EMEA and APAC. Our scale is beyond that of virtually all of our clients. And, there is no ‘leap of faith’ to outsource anything here. Tourmaline is simply a new broker relationship with unique reach and positioning.
Tourmaline has grown to over 20 personnel in our EMEA and APAC offices, 13 of whom are senior traders, averaging over 20+ years of experience. Our teams face off against over 225 brokers in EMEA and APAC alone. (Overall, Tourmaline Partners, positioned as a large buy-side trading franchise, has 38+ traders, executing in 50+ emerging and developed markets, facing over 425 broker dealers on behalf of 400+ institutional clients.) Our trading resources – in global equities, derivatives and ETFs – are customized for each client and supported by senior operations teams in all regions who settle locally, 24/6, following the sun.
Tourmaline, by virtue of our positioning, also provides a strategic lever to help buy-side traders better manage their sell-side broker lists. We preclude the need for hedge funds, long only firms and asset managers to onboard and maintain brokers with whom they will likely trade infrequently and/or opportunistically.
Scale and independence matter greatly in providing external trading expertise. A sound Supplemental Trading strategy provides an investment manager with a single point of execution to engage a global pool of liquidity without the need to maintain a long tail of brokers. Tourmaline Partners provides a valuable lever for a buy-side trader, which, importantly, dovetails with their existing workflow.
Tourmaline’s dedicated, expert trading framework is a variable-cost solution that helps our clients save time and money while reducing risk. Our scale and pertinence with global bulge bracket firms, local and specialty broker dealers, affords managers an improved framework to seek best execution and achieve better trading outcomes.
Tourmaline’s approach complements a buy-side trader’s existing sell-side resources, providing a single broker contact to a broad panel of brokers with whom they do not engage directly. And, we do not disintermediate the sell-side as we do NOT compete with them in their core businesses. Tourmaline shepherds order flow to sell-side BDs from clients with whom they do not interact directly. Lastly, all of Tourmaline’s trading is transparent and measured.
Our scale, independence and flexibility are also leveraged to help our clients to manage global commission wallets through the use of CCAs, CSAs, attribution and aggregation. Funding research with all of one’strading is a must, as few managers have the luxury of excess order flow.
Conclusion
In 2023 and thus far through Q1 2024, we see continued demand to help trade offshore markets. Much of this demand stems from a new-found comfort in leaning on experts.
However, it also reflects a market challenged by low volumes and volatility, not to mention funding challenges. Reduced equities commissions in the U.S. and Europe do not help matters.
We also note that rising industry costs (compliance, regulation and technology) and a growth in passive management continue to erode buy-side margins. This has led many investment managers to ensure that their infrastructure is “right-sized” to their AUM.
These broader industry challenges have certainly played a role in leading investment managers to engage outside trading expertise as well as and other niche, best-of-breed specialists.
Please reach out to us at info@tourmalinellc.com to learn more about Tourmaline Partners and our global resources.
Tim O’Halloran is a Managing Director with Tourmaline Partners.
