In today’s complex financial markets, investment managers, whether they are running private funds or ETFs and mutual funds, are facing challenges that would have seemed unimaginable a decade ago. Picture this: it’s 1:00 AM, you’re on your third coffee, simultaneously watching Asian markets close while European ones open, all while trying to remember if you updated those execution algorithms over the weekend.
Understanding Outsourced Trading
Let’s talk about what outsourced trading really means in today’s landscape. It’s essentially having an experienced trading team on demand, handling everything from execution to system monitoring. It means handing off the risk, cost, technology issues, and most of all…. time. Who doesn’t want a few more hours over the weekend instead of checking Sunday’s opening or updating that latest software patch.
The Evolution of Trading Operations
Traditional in-house trading desks started with simple signals that maybe were called into an execution desk, which executed the trade and returned the file over the phone. Then came direct market access via electronic trading platforms, or orders sent via an email or FTP site. Then access to overnight markets in the US and offshore markets in Europe and Asia. Then an increase in market data costs, Order Management Systems (OMS), Risk Management Systems (RMS), cyber security needs, and all the rest. Rattle off all the stuff needed to run an efficient trade desk these days and you start to sound like Billy Joel singing we didn’t start the fire:
Market orders, limit fills,
Slippage rising, time to chill.
Clearing houses, margin calls,
Regulations, compliance walls.
Execution, speed and grace,
Latency issues, keep the pace.
Order types, they come in waves,
Stop-loss triggers, how it saves.
Chorus:
We didn’t start the fire,
It was always moving,
Since the market’s grooving.
We didn’t start the fire,
No, we didn’t quote it,
But we’re here to own it.
Futures contracts, options too,
Hedging risks, what will we do?
Expiration, strike price set,
Volatility, don’t forget.
Clearing firms, they settle fast,
Trade confirmations, hold them fast.
Execution venues, dark pools hide,
Best execution, we abide.
Today’s in-house teams are feeling the squeeze. Consider Sarah, a senior trader at a mid-sized fund, who spends countless hours trying to keep up with new exchange protocols and market data feeds. Or Dave who juggles dozens of relationships with multiple brokers across different time zones to stay on top of liquidity to ensure they are getting the best price.
Key Benefits of Outsourced Trading
Cost Efficiency in Modern Markets
The financial impact of maintaining an in-house trading desk is substantial. Consider these typical annual costs:
- Market data feeds
- Trading platform licenses
- Multiple exchange connections
- Staff salaries and benefits
- Technology infrastructure maintenance
Access to Specialized Expertise
Outsourced trading provides immediate access to experienced professionals with deep market knowledge across various regions and asset classes. How do you best exit that short option that’s gone into the money? What does liquidity look like after hours to get a trade done? How do you access Japanese Rubber markets? An experienced outsourced trading desk is just a phone call away.
Operational Flexibility and Scalability
Firms can scale their trading operations up or down based on need, without the hiring/firing cycles. This flexibility is particularly valuable when creating a new strategy or accessing a new set of markets.
Technology Enhancement and Innovation
No more late nights updating algorithms or worrying about system upgrades. Modern outsourced trading providers handle:
- Execution algorithm maintenance
- Trading platform updates
- Market connectivity issues
- Real-time reporting systems
Essential Components of Successful Outsourced Trading
Execution Excellence
This goes beyond just getting the trade done. It’s about maintaining relationships with numerous liquidity providers, knowing where to find the best prices, and having that crucial network of call-around brokers to check for off-screen opportunities.
Robust Technology Infrastructure
The technology landscape never stops evolving. Outsourced trading partners stay on top of:
- New exchange protocols
- Connectivity requirements
- Trading algorithm updates
- Risk management systems
Compliance and Risk Management
With regulations constantly changing and markets becoming more complex, having institutional-grade monitoring systems and compliance expertise is crucial. An outsourced trading partner maintains comprehensive trade monitoring capabilities and effective risk controls.
The market isn’t getting any simpler – new exchanges emerge, regulations shift, and technology evolves daily. Outsourced trading lets you focus on what you do best: making investment decisions and serving your clients.
RCM Alternatives: Setting the Standard in Outsourced Trading
At RCM Alternatives, we’ve established ourselves as a leader in the outsourced trading space through its comprehensive 24/6 trade desk. Operating continuously from Sunday 3:30 PM through Friday 5:00 PM, we provide uninterrupted market access and execution capabilities that serve as a seamless extension of clients’ trading operations.
The RCM Advantage
At the core of our offering is a team of regulated, licensed futures and options veterans, each bringing over two decades of experience across buy-side, sell-side, floor, and electronic trading environments. This depth of expertise ensures that clients receive sophisticated trading solutions tailored to their specific needs and objectives.
As an FCM-agnostic service provider, we offer unprecedented flexibility in execution and clearing relationships. This independence allows clients to maintain their preferred clearing relationships while benefiting from our execution expertise and technology infrastructure.
Check out more on our Outsourced Trading desk today.
Already interested? Reach out!
